What is general ledger reconciliation?
General ledger reconciliation is the process of confirming that a general ledger account is accurate, complete, and supported by underlying records. The account balance is compared with subledgers, statements, schedules, or transaction details. Differences are investigated, documented and resolved before the reconciliation is reviewed and approved.
Also known as: GL reconciliation or general ledger account reconciliation.
The process is normally performed during the month-end close, although higher-risk accounts may be reviewed more frequently.
What records are compared during a general ledger reconciliation?
The supporting record depends on the account being reconciled. Examples include:
- Accounts receivable and accounts payable subledgers
- Bank statements
- Fixed asset registers
- Inventory records
- Payroll reports
- Tax schedules
- Intercompany balances
- Accrual and prepayment schedules
Some accounts are supported by a direct external or subledger balance. Others require an analysis of transactions and a schedule explaining how the closing balance was calculated.
Example: A fixed asset control account can be compared with the corresponding asset register and SAP reports. Any difference is investigated, documented and resolved or recorded as a reconciling item before approval.
What are the steps in general ledger reconciliation?
A controlled process usually involves:
- Confirming the closing general ledger balance.
- Collecting the relevant supporting records.
- Comparing the balances or reviewing the account activity.
- Identifying reconciling items and unusual movements.
- Posting corrections where required.
- Attaching evidence and documenting explanations.
- Sending the reconciliation for review and approval.
- Monitoring unresolved items.
The work is complete only when the balance is supported, and any outstanding difference has a clear explanation, owner, and resolution plan.
Why do general ledger reconciliations matter?
General ledger reconciliations help prevent errors from carrying into financial statements. They also give reviewers and auditors a clear record of how an account was checked.
Common issues identified through reconciliation include:
- Duplicate or missing journals
- Postings to the wrong account or period
- Differences between a subledger and the general ledger
- Unsupported balances
- Old reconciling items
- Unusual or unexpected account movements
What is the difference between general ledger and balance sheet reconciliation?
General ledger reconciliation describes the checking of GL accounts. Balance sheet reconciliation focuses specifically on accounts reported on the balance sheet. In practice, the terms often overlap because balance sheet accounts are held in the general ledger and form a major part of the month-end reconciliation programme.
Not every general ledger review is a balance sheet reconciliation. Profit and loss accounts may also be analysed, but their review may follow a different process.
How can general ledger reconciliation be managed in SAP?
SAP contains the general ledger balances, journal entries and drill-down detail needed for the review. When reconciliation schedules, explanations and approvals are maintained outside SAP, finance teams must connect spreadsheets and files back to the source transactions manually.
The BEST Balance Sheet Recons module supports general ledger and balance sheet account reconciliation within SAP. It helps finance teams categorise accounts, identify risk, attach supporting information, manage preparer and reviewer approvals and retain a complete audit history.
Bacardi uses BEST across 30 countries and completes more than 4,500 reconciliations each month. The organisation increased the number of reconciliations completed by 40% with the same resources. Read the Bacardi case study.
Frequently asked questions
How often should general ledger accounts be reconciled?
Material and higher-risk accounts are commonly reconciled monthly. Frequency should reflect the account’s risk, transaction volume, volatility and the organisation’s financial control policy.
Who prepares and approves a GL reconciliation?
An assigned account owner or preparer normally completes the reconciliation. A separate reviewer checks the evidence, explanations and unresolved items before approval.
Does reconciliation correct an error automatically?
No. Reconciliation identifies and documents a difference. A correction may require a journal entry, master-data change or operational follow-up, depending on the cause.