How are accounts reconciled at month-end?

Month-end account reconciliation is a disciplined sequence of verification steps that ensures the general ledger reflects economic reality and complies with accounting standards. The process begins with a complete trial balance and a list of supporting subledgers and external confirmations. A core task is reconciling cash: tracing bank statements to the cash ledger, identifying outstanding checks, deposits in transit, and clearing items. AICPA staff American Institute of Certified Public Accountants emphasizes that timely bank reconciliations are fundamental controls to detect errors and fraud and to support reliable cash reporting.

Matching subledgers to control accounts is the next essential activity. Accounts receivable reconciliations tie customer balances and aged receivables schedules to the ledger; accounts payable reconciliations confirm vendor balances, unrecorded invoices, and purchase order commitments. Inventory reconciliation confirms that perpetual inventory systems agree with physical counts and costing methods. Intercompany balances require special attention in multi-entity organizations to resolve timing and currency differences and to prepare consolidation eliminations. FASB staff Financial Accounting Standards Board underscores the importance of cut-off procedures and accrual recognition so that revenues and expenses are recorded in the correct reporting period.

Control procedures and adjustments
Reconcilers investigate reconciling items, determine root causes, and prepare adjusting journal entries when necessary. Common causes include timing differences from bank processing, posting errors, duplicate or missing invoices, and incorrectly applied payments. Foreign-currency transactions introduce translation and remeasurement variances that must be explained and posted according to applicable standards. Documentation should include the source documents, a clear explanation for each adjustment, and authorization by a reviewer. Internal audit guidance from Institute of Internal Auditors staff Institute of Internal Auditors recommends segregation of duties between preparers and approvers to reduce the risk of manipulation.

Human and contextual factors
Month-end reconciliation is influenced by organizational culture, resourcing, and local regulations. Small entities may rely on one individual’s institutional knowledge, increasing key-person risk, while larger corporations use centralized teams and automated reconciliation software to improve consistency and auditability. In countries with value-added tax regimes, reconciling tax accounts and ensuring timely filing affect both financial statements and cash flow. Seasonal industries such as agriculture or tourism face additional accrual judgment around harvests or peak seasons, which requires open communication between operations and finance.

Consequences of weak reconciliation practices
Incomplete or late reconciliations can lead to misstated financials, impaired decision making, covenant breaches with lenders, and increased audit adjustments. Persistent unresolved items can mask fraud or control breakdowns and increase the cost and duration of external audits. Robust month-end reconciliation creates evidence for financial statement assertions, supports timely reporting, and builds stakeholder confidence. Adopting clear procedures, appropriate tools, and documented approvals aligns practice with professional guidance and reduces risk across territories and business models.