Presentation on theme: "Account Reconciliation Training"— Presentation transcript:
1Account Reconciliation Training Presented by:RecWizardCopyright Account-Reconciliations.com, Inc.Copyright Account-Reconciliations.com, Inc.
2What will be covered Defining what a reconciliation is. Explaining the requirements necessary in creating and retaining appropriate supporting documentation.Introduction to the automated reconciliation tool… RecWizard.Hands on samples and training in using RecWizard.Copyright 2004 – Account-Reconciliations.com, Inc.
3Test Question: What is a reconciliation? Something required by Sarbanes-Oxley that was not important before 2001.Part of my job duties that wastes time.A means of creating stress between my supervisor and me.An analysis of an account balance that explains what the balance is, why it is there, and that it is adequate.Copyright 2004 – Account-Reconciliations.com, Inc.
4Purpose of an analysis or reconciliation… … assess the validity, correctness or appropriateness of the account balance at a specific point in time - documented by relevant calculations, clear and complete explanations and copies of supporting documents.Copyright 2004 – Account-Reconciliations.com, Inc.
5Analysis of an Account Balance – what it is not List of all activity in the account – that’s the General LedgerRoll-forward of activity showing the beginning balance and all activity in the current month – that’s almost the same as the General Ledger mentioned aboveSummary of items with very brief descriptions or abbreviations that only the preparer understandsCopyright 2004 – Account-Reconciliations.com, Inc.
6Analysis of an Account Balance – what it should be Explanation of what the amount is and why it is appropriateSubstantiated by copies of appropriate documents and calculationsClearly identified information that a reasonably informed person would be able to understandCopyright 2004 – Account-Reconciliations.com, Inc.
7Questions to ask when preparing your analysis… When analyzing an account you will ask … and answer… these normal investigative questions:WhenWhatWhyWhoHow muchCopyright 2004 – Account-Reconciliations.com, Inc.
8When? There are three parts of the “When” question When did the item appear in the General Ledger – this is usually the month that you are preparing the reconciliation forWhen will the item no longer be included in a reconciliationWhen should the item have been recorded if it was not recorded in the proper periodCopyright 2004 – Account-Reconciliations.com, Inc.
9What? What is the purpose of this item For some accounts this may be an explanation for each item in the account balanceFor some accounts there may be a permanent explanation of what the purpose of the account is and how the balance should be calculated and evaluatedCopyright 2004 – Account-Reconciliations.com, Inc.
10Why?The explanation of “why” may be included in the answers to “when” and “what”If “why” is not clear, further explain the reconciling item or clarify the account description or policy/procedureCopyright 2004 – Account-Reconciliations.com, Inc.
11Who?It is important to know who else may be involved in the item or is required to take an action. This could include:CustomersVendorsSuppliersInternal departments or employees who are responsible for the appropriateness of the amount recorded or will follow up on the itemCopyright 2004 – Account-Reconciliations.com, Inc.
12How much? The dollar amounts included in the account This may include an evaluation of the amount and whether it is adequateAllowance for Doubtful AccountsReserve for Warranty ClaimsAccrual for Federal and State Income TaxesCopyright 2004 – Account-Reconciliations.com, Inc.
13Substantiated by copies of appropriate documents Asset examplesAccounts receivable – copy of aged trial balance total pageFixed assets – copy of fixed asset ledger total page and possibly copies of invoices for new purchasesPrepaid property taxes – copies of tax bills as they are paidDeposits – copy of check used to pay the deposit with attached approvalsCopyright 2004 – Account-Reconciliations.com, Inc.
14Substantiated by copies of appropriate documents Liability examplesAccounts payable – copy of aged trial balance total pageDebt – Current and Non-Current – copy of the loan document if a fixed amount loan, or copies of monthly statements if the amount and interest varyAccrued liabilities – copies of journal entries, calculations, assumption narrativesCopyright 2004 – Account-Reconciliations.com, Inc.
15Clearly identified information that a third party understands Assume the person reading your document understands accounting, but is NOT youMake sure assumptions are clearly highlighted and incorporated into calculations – be careful of hidden formulasCopyright 2004 – Account-Reconciliations.com, Inc.
16When should reconciliations be completed? Ideal – part of month end close process – “fix problems instead of document problems”Key Accounts – no more than two days after the G/L cutoff dateAll accounts – no later than the last day of the month after the G/L close dateNOTE: These are only general suggestions – your company should develop its own specific policiesCopyright 2004 – Account-Reconciliations.com, Inc.
17Prepare - Approve - Review There are three levels to document activities by different staff members – use them as defined by your company policyPrepare – basic level acknowledging that the reconciliation has been completedApprove – second level acknowledging that someone has looked at the reconciliation and agrees with its completeness, accuracy and appropriatenessReview – third level acknowledging that a higher level of management concurs with the ApproverNOTE: Your company may not use all these levels or you may have staff members who will be responsible for more than one of these functionsCopyright 2004 – Account-Reconciliations.com, Inc.
18Recommended Month-End Files Journal Entries – in numerical order including appropriate documentation substantiating the entry – i.e. copies of reports, invoices or documentsAccount Reconciliations – in account number order including appropriate documentation substantiating the balanceCopyright 2004 – Account-Reconciliations.com, Inc.
19What to do with Documents Related to Multiple Periods If the document is small, make copies and file with each month’s reconciliationsIf the document is long, such as a loan agreement, move to the most current month. Make a note on the last month reconciliation that the document was moved – i.e. “loan agreement moved to May 2005 reconciliation binder”.Copyright 2004 – Account-Reconciliations.com, Inc.
20RecWizard How do you do it all? Introducing… Copyright 2004 – Account-Reconciliations.com, Inc.
21Highlights of RecWizard Database design using predefined templatesExtensive tutorial to provide clear instructions in using the tool and guidance on good reconciliation techniqueAbility to document specific accounting procedures and company policiesDocumentation of status of reconciliations Prepared / Approved / ReviewedCopyright 2004 – Account-Reconciliations.com, Inc.
22Templates Designed to prompt you to gathering the correct information ListCalculated BalanceSubledger MatchAmortizable PrepaidChecking AccountCopyright 2004 – Account-Reconciliations.com, Inc.
23TutorialGives guidance on how to use RecWizard and suggestions for good accounting practices and good reconciliation techniqueEasy to use web-type format for “clickable” surfing24 sample accounts with detailed transactions and a matching database to practice onCopyright 2004 – Account-Reconciliations.com, Inc.
24Documentation of Procedures and Company Policies Easily updateable fields to keep information currentConvenient access while preparing reconciliations to assure consistency of reportingAbility to create detailed procedure documentation to use for training of new employees or assisting during a situation where the employee is not available (i.e. emergency family illness)Copyright 2004 – Account-Reconciliations.com, Inc.
25Status of Reconciliations General Ledger Reconciliation Status Report shows the status of every account that is included in RecWizard.Current month status – Prepared, Approved or ReviewedIf not completed in the current month, the last month Prepared is shownAny unidentified difference is notedCopyright 2004 – Account-Reconciliations.com, Inc.
26RecWizard TrainingThe RecWizard program will be demonstrated using the RecWizard Tutorial database.Account setupReconciliations-including reconciling itemsListCalculated BalanceSubledger MatchAmortizable PrepaidChecking AccountCopyright 2004 – Account-Reconciliations.com, Inc.
27RecWizard Training continued Use of the TutorialConnecting to the Tutorial databaseSurfing through the TutorialGeneral Ledger Reconciliation Summary ReportReview of key fields on the reportExamination of reconciliations showing the information that is reflected on the GLRSRCopyright 2004 – Account-Reconciliations.com, Inc.
28Account Setup 1220 - Prepaid Property Taxes Account type Reconciliation typeKey control accountActive accountERP account number (optional)Discussion of Description and Company Policy and/or Procedure fieldsCopyright 2004 – Account-Reconciliations.com, Inc.
29List Reconciliation Type 1009 – Petty CashDocumentation is primarily narrative and explanatory textReview of actual account in the RecWizard program.Copyright 2004 – Account-Reconciliations.com, Inc.
30Calculated Balance Reconciliation Type 1101 – Allowance for Doubtful AccountsDocumentation support is provided by a calculation worksheet.Additional supporting documentation for the calculation would include a copy of the Aged Trial Balance reportReview of actual account in the RecWizard program.Copyright 2004 – Account-Reconciliations.com, Inc.
31Subledger Match Reconciliation Type 1100 – Accounts ReceivableDocumentation support is provided by a copy of the Aged Trial Balance reportReview of actual account in the RecWizard program.Copyright 2004 – Account-Reconciliations.com, Inc.
32Amortizable Prepaid Reconciliation Type 1220 – Prepaid Property TaxDocumentation support is provided by copies of the tax bills showing the amount and the tax period covered by the billReview of actual account in the RecWizard program.Copyright 2004 – Account-Reconciliations.com, Inc.
33Checking Account Reconciliation Type 1000– National Bank CheckingDocumentation support is provided by a printed statement from the bankAdditional support is provided by calculating groups of reconciling items, such as:Outstanding checksDeposits in transitBank feesNSF checksReview of actual account in the RecWizard program.Copyright 2004 – Account-Reconciliations.com, Inc.
34Tutorial RecWizardTutorial.pdf Adobe Acrobat reader is required to view the tutorialWeb-site design and functionality for “clickable” surfingExamples in the tutorial are all included in the database RecWizardTutorial.mdb for learning and practiceCopyright 2004 – Account-Reconciliations.com, Inc.
35General Ledger Reconciliation Summary Report All accounts and their balancesStatus of the reconciliation for the current monthIf the account has not been reconciled in the current month, the last month the reconciliation was prepared is shownUnidentified differenceCopyright 2004 – Account-Reconciliations.com, Inc.
36Best practices for account reconciliations and analysis Prepare reconciliations on a timely basisConsider preparing certain key reconciliations prior to the month-end cutoff date - fix errors instead of document errorsIdentify reconciling items and document them completelyDispose of reconciling items on a timely basis so they do not accumulate into an intolerable errorCopyright 2004 – Account-Reconciliations.com, Inc.
37Suggestions and Comments At RecWizard we are always working on improving our product. If you have comments or suggestions, please contact us.Phone:Mail: 7 Nicklaus LaneFarmingdale, NJ 07727Copyright 2004 – Account-Reconciliations.com, Inc.
38Thank you for your time.Copyright Account-Reconciliations.com, Inc.