copyright 2004 - account-reconciliations.com, inc.slide 1 account reconciliation training presented...
TRANSCRIPT
Copyright 2004 - Account-Reconciliations.com, Inc. Slide 1
Account Reconciliation Training
Presented by:
RecWizard
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What 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.
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Test Question:What is a reconciliation?
1. Something required by Sarbanes-Oxley that was not important before 2001.
2. Part of my job duties that wastes time.
3. A means of creating stress between my supervisor and me.
4. An analysis of an account balance that explains what the balance is, why it is there, and that it is adequate.
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Purpose 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.
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Analysis of an Account Balance – what it is not
List of all activity in the account – that’s the General Ledger
Roll-forward of activity showing the beginning balance and all activity in the current month – that’s almost the same as the General Ledger mentioned above
Summary of items with very brief descriptions or abbreviations that only the preparer understands
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Analysis of an Account Balance – what it should be
Explanation of what the amount is and why it is appropriate
Substantiated by copies of appropriate documents and calculations
Clearly identified information that a reasonably informed person would be able to understand
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Questions to ask when preparing your analysis…
When analyzing an account you will ask … and answer… these normal investigative questions: When What Why Who How much
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When?
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 for
When will the item no longer be included in a reconciliation
When should the item have been recorded if it was not recorded in the proper period
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What?
What is the purpose of this item For some accounts this may be an
explanation for each item in the account balance
For some accounts there may be a permanent explanation of what the purpose of the account is and how the balance should be calculated and evaluated
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Why?
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/procedure
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Who?
It is important to know who else may be involved in the item or is required to take an action. This could include: Customers Vendors Suppliers Internal departments or employees who
are responsible for the appropriateness of the amount recorded or will follow up on the item
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How much?
The dollar amounts included in the account This may include an evaluation of the
amount and whether it is adequate Allowance for Doubtful Accounts Reserve for Warranty Claims Accrual for Federal and State Income Taxes
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Substantiated by copies of appropriate documents
Asset examples Accounts receivable – copy of aged trial
balance total page Fixed assets – copy of fixed asset ledger
total page and possibly copies of invoices for new purchases
Prepaid property taxes – copies of tax bills as they are paid
Deposits – copy of check used to pay the deposit with attached approvals
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Substantiated by copies of appropriate documents
Liability examples Accounts payable – copy of aged trial
balance total page Debt – Current and Non-Current – copy of
the loan document if a fixed amount loan, or copies of monthly statements if the amount and interest vary
Accrued liabilities – copies of journal entries, calculations, assumption narratives
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Clearly identified informationthat a third party understands
Assume the person reading your document understands accounting, but is NOT you
Make sure assumptions are clearly highlighted and incorporated into calculations – be careful of hidden formulas
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When 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 date
All accounts – no later than the last day of the month after the G/L close date NOTE: These are only general
suggestions – your company should develop its own specific policies
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Prepare - Approve - Review
There are three levels to document activities by different staff members – use them as defined by your company policy Prepare – basic level acknowledging that the
reconciliation has been completed Approve – second level acknowledging that
someone has looked at the reconciliation and agrees with its completeness, accuracy and appropriateness
Review – third level acknowledging that a higher level of management concurs with the Approver
NOTE: Your company may not use all these levels or you may have staff members who will be responsible for more than one of these functions
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Recommended Month-End Files
Journal Entries – in numerical order including appropriate documentation substantiating the entry – i.e. copies of reports, invoices or documents
Account Reconciliations – in account number order including appropriate documentation substantiating the balance
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What to do with Documents Related to Multiple Periods
If the document is small, make copies and file with each month’s reconciliations
If 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”.
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How do you do it all?
Introducing…
RecWizard
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Highlights of RecWizard
Database design using predefined templates
Extensive tutorial to provide clear instructions in using the tool and guidance on good reconciliation technique
Ability to document specific accounting procedures and company policies
Documentation of status of reconciliations Prepared / Approved / Reviewed
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Templates
Designed to prompt you to gathering the correct information List Calculated Balance Subledger Match Amortizable Prepaid Checking Account
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Tutorial
Gives guidance on how to use RecWizard and suggestions for good accounting practices and good reconciliation technique
Easy to use web-type format for “clickable” surfing
24 sample accounts with detailed transactions and a matching database to practice on
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Documentation of Procedures and Company Policies
Easily updateable fields to keep information current Convenient access while preparing
reconciliations to assure consistency of reporting
Ability 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)
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Status of Reconciliations
General Ledger Reconciliation Status Report shows the status of every account that is included in RecWizard. Current month status – Prepared,
Approved or Reviewed If not completed in the current month, the
last month Prepared is shown Any unidentified difference is noted
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RecWizard Training
The RecWizard program will be demonstrated using the RecWizard Tutorial database. Account setup Reconciliations-including reconciling items
List Calculated Balance Subledger Match Amortizable Prepaid Checking Account
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RecWizard Training continued
Use of the Tutorial Connecting to the Tutorial database Surfing through the Tutorial
General Ledger Reconciliation Summary Report
Review of key fields on the report Examination of reconciliations showing the
information that is reflected on the GLRSR
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Account Setup
1220 - Prepaid Property Taxes Account type Reconciliation type Key control account Active account ERP account number (optional) Discussion of Description and Company
Policy and/or Procedure fields
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List Reconciliation Type
1009 – Petty Cash Documentation is primarily narrative and
explanatory text
Review of actual account in the RecWizard program.
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Calculated Balance Reconciliation Type
1101 – Allowance for Doubtful Accounts Documentation support is provided by a
calculation worksheet. Additional supporting documentation for the
calculation would include a copy of the Aged Trial Balance report
Review of actual account in the RecWizard program.
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Subledger Match Reconciliation Type
1100 – Accounts Receivable Documentation support is provided by a
copy of the Aged Trial Balance report
Review of actual account in the RecWizard program.
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Amortizable Prepaid Reconciliation Type
1220 – Prepaid Property Tax Documentation support is provided by
copies of the tax bills showing the amount and the tax period covered by the bill
Review of actual account in the RecWizard program.
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Checking Account Reconciliation Type 1000– National Bank Checking
Documentation support is provided by a printed statement from the bank
Additional support is provided by calculating groups of reconciling items, such as:
Outstanding checks Deposits in transit Bank fees NSF checks
Review of actual account in the RecWizard program.
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Tutorial
RecWizardTutorial.pdf Adobe Acrobat reader is required to view
the tutorial Web-site design and functionality for
“clickable” surfing Examples in the tutorial are all included
in the database RecWizardTutorial.mdb for learning and practice
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General Ledger Reconciliation Summary Report
All accounts and their balances Status of the reconciliation for the
current month If the account has not been reconciled in
the current month, the last month the reconciliation was prepared is shown
Unidentified difference
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Best practices for account reconciliations and analysis Prepare reconciliations on a timely basis
Consider preparing certain key reconciliations prior to the month-end cutoff date - fix errors instead of document errors
Identify reconciling items and document them completely
Dispose of reconciling items on a timely basis so they do not accumulate into an intolerable error
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Suggestions and Comments
At RecWizard we are always working on improving our product. If you have comments or suggestions, please contact us. Phone: 732.938.7000 Email: [email protected] Mail: 7 Nicklaus Lane Farmingdale, NJ 07727
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Thank you for your time.