Need to know how to reconcile a general ledger? Not sure what column represents what? Afraid you're going to end up with a wrong balance? Try following these simple tips for proper general ledger reconciliation:
Separate general ledger accounts. Make sure you maintain at least five general ledger sheets, each recording the following five categories of finances: assets, liabilities, revenue, owner's equity and expenses. Create a master general ledger to combine all five of these categories into one record of how everything is going overall. This will help you determine which areas are struggling and which parts of your business are flourishing.
Simple ledger sheets. You should have four columns: transaction description, debits, credits and balance.
Careful adding and subtracting. Make sure your balance column makes sense as you subtract and add your debits and credits.
At the same time, watch out for the following common reconciliation mistakes:
Transposing numbers. It's easy to transpose numbers, especially if you're tired. You may transpose numbers while writing them down or typing them in, or you may do this when entering numbers into the calculator. If the numbers don't add up, go back and make sure you haven't reversed anything.
Omissions and double entries. Make sure you have not left out or double-entered any debits or credits. This is why it's important to do bookkeeping work on a regular basis, not just once in a while. You may overlook these kinds of mistakes if you wait too long between accounting sessions.
Reporting in the wrong category. Make sure you reported all debits in the debit category and all credits in the credit category.
When reconciling your general ledger with the bank statement, you may think you've kept your general ledger up to date. But then you get your bank statement, which reflects a different balance. Don't worry; this happens all the time. The differences in the two documents probably reflect one or more of the following:
Transactions in transit. A transaction in transit is an outstanding check, a deposit that has not yet been credited or a debit not yet deducted. Look to see if all checks have cleared, if all deposits have been credited and all auto-pays have cleared.
Unexpected bank fees. If you've bounced checks, gone over or under limits or requested particular services, you may have unexpected bank fees factoring into the reconciliation.
Calculation mistakes. Reconciling with your bank statement is one of the best ways to find your addition and subtraction or entry mistakes.
Bank errors. Remember how it felt to pick up the "Bank Error in Your Favor" card when playing Monopoly? Sometimes bank errors happen in real life-both in your favor and against you. If you check and double-check your records and still cannot reconcile the two, get on the phone with the bank. Ask for any late fees or charges to be reversed as the correction is made.
 | The basic accounting equation elements are simple concepts you need to grasp in order to run a small business. Accounting is based on the concept that a balance must be maintained through debits and credits. |
 | What is a CPA? "CPA" stands for "Certified Public Accountant," and you would go to a CPA for tax advice. However, not everyone who provides tax advice is a CPA. The three letters "CPA" can mean a lot if you need any kind of tax or business help. |
 | Need to know how to prepare a general ledger? Wondering if you're properly recording your small business expenses and credits? The following advice will help you set up your general ledger sheets properly. |
 | You'll have to read a balance sheet if you ever consider going into venture capitalism, investing in small businesses or getting involved on a corporate level with accounting. |
Accounting for outstanding checks can be time-consuming and troublesome, but you'll want to make sure you do so on a regular basis to prevent serious balance sheet reconciliation problems later. |
