Reconciliations as a control
Each reconciliation compares two records of the same thing. Learn what each one can prove, and what it cannot.
Task 1Two records of the same thing3 questions
A reconciliation compares two records that should agree but are kept separately. If they differ, one of them is wrong or out of date.
| Reconciliation | Compares | With |
|---|---|---|
| Bank | Cash book balance | Bank statement |
| Sales ledger control | Control account balance | List of customer balances |
| Purchases ledger control | Control account balance | List of supplier balances |
| Supplier statement | Supplier's account in the purchases ledger | Statement sent by the supplier |
| VAT | VAT control account balance | VAT return |
| Petty cash | Cash and vouchers in the tin | The float |
A record made outside the business is the strongest evidence, because nobody inside could have changed it.
A control account reconciliation only compares totals. It cannot see an entry that sits in the wrong supplier's account.
Task 2Timing difference or error?4 questions
Task 3What makes a reconciliation worth trusting2 questions