02 Account Reconciliation

Definition: What is it?

Account Reconciliation is a tool that is used to flag that an accounting transaction has been verified as correct and that the balance of the general ledger account should be increased or reduced by that amount. Normally a reconciliation would consist of many individual transactions and each one would be marked as verified as part of the process.

Account Reconciliation is done by account which means that each general ledger account that has at least one transaction will need to be reviewed and then reconciled.

Currently in OFBiz an Account Reconciliation can be created even if the accounting transaction has already been posted to the general ledger.

IMPORTANT NOTE: There appear to be a couple of possible bugs here as follows:

if the transaction is posted before the account reconciliation takes place then the accounting transaction keeps re-appearing in the account reconciliation screen. This means that you can create multiple account reconciliations for the same entry....which shouldnt be the case..... Do you need to switch off the automatic posting to the GL if the transaction hasnt been reconciled?????
when you create a new account reconciliation for the same account it doesnt take into account any previous reconciled balance (this means that you dont have an ongoing current balance for an account as at a particular date. You could use the Income Statement restricted by date criteria but then would have to sift through all the transactions to see which ones were part of your reconciled balance...)

What is it used for?

All businesses will need to reconcile and validate the entries in their chart of accounts for tax or fiscal purposes. Account Reconciliation is used to verify the balances of each account as at a certain date. Usually a fiscal year is broken down into smaller periods (eg month, quarter etc) and a business would normally want to ensure that their accounts are validated and reconciled from one month to the next. This is extremely important for processing things such as VAT or GST.

Example: A company receives a bank statement detailing all the transactions for the month. Assume that the bank statement reflects all the sales and payments that have been processed in OFBiz.

Using the Account Reconciliation you will select 111100 General Checking Account (as this account should mirror exactly your bank statement)
Using the bank statement as the master you will mark (or select the check box) next to the screen transactions that match
All the transactions selected will be summed (or totalled) and the balance of that calculation will be stored as the 'Reconciled Balance'
The Reconciled Balance should match the closing balance of your bank statement

NOTE: It may be that additional transactions that are not processed in OFBiz (or have not yet been processed) are shown on your bank statement but not on the screen. This means that your reconciled balance will not match until you create accounting transactions to reflect the missing ones.

NOTE TO CHECK: Does a new reconciliation on the same general ledger account take into account the previous reconciled balance .....??????

What's on the screen?

To do

How do I create an Account Reconciliation?

NOTE TO CHECK: Does it behave differently if the accounting transaction has not yet been posted....???

Example: To create an Account Reconciliation

Select the 'GL Account Id' for the general ledger account you want to reconcile from the drop down box
Press the 'Search' button
If any transactions exist for the account the list will be displayed (NOTE: This display doesnt show if the transaction was a debit or a credit - which could be a problem when reconciling as dont know whether it went in to the account or came out.....????)
Select the individual transactions to reconcile using the check boxes
Press the 'Create Account Reconciliation' button

How do I update an Account Reconciliation?

An Account Reconciliation can be updated using the 'Account Reconciliations' sub menu. Only the following fields can be updated:

GL Reconciliation Name
Description
Reconciled Date

This means that no adjustments can be made for the reconciled balance itself or adding or removing transactions from the initially selected reconciled transactions.

How do I delete an Account Reconciliation

An Account Reconciliation cannot be currently deleted through the user interface. (NOTE: Not sure if this is recommended but it probably could be removed using Webtools / Entity Data maintenance but you would need to be very careful)

Page tree