what is account reconciliation 
reconciliation is an accounting procedure that compares two sets of records to check that the figures are correct and in agreement and confirms that accounts in a general ledger are consistent and complete in double entry accounting each transaction is posted as both a debit and a credit businesses and individuals may use account reconciliation daily monthly quarterly or annually unexplained or mysterious discrepancies may warn of fraud or cooking the books investopedia joules garciabookkeepingthere is no standard way to perform an account reconciliation however generally accepted accounting principles gaap require double entry bookkeeping where a transaction is entered into the general ledger in two places every financial transaction is posted as a credit and a debit when a business makes a sale it debits either cash or accounts receivable on the balance sheet and credits sales revenue on the income statement in the reconciliation debits and credits should balance out to zero banks and retailers can make errors when counting money and issuing cash to customers as change variances between expected and actual amounts are called cash over short this variance account is kept and reconciled as part of the company s income statement double entry accounting exampleabc is a lawn care company that purchases 2 000 worth of equipment the equipment is used to complete abc s first lawn care project worth 500 using a double entry accounting system as shown below abc credits cash for 2 000 and debits assets which is the equipment by the same amount for the first job abc credits 500 in revenue and debits the same amount for accounts receivable both credits and debits are reconciled and equal the same amount types of reconciliationthe account conversion method is where business records such as receipts or canceled checks are simply compared with the entries in the general ledger this is similar to personal account reconciliation direct and indirect cash flowsome reconciliations are necessary to ensure that cash inflows and outflows concur between the income statement balance sheet and cash flow statement cash flow can be calculated through either a direct method or an indirect method gaap requires that if the direct method is used the company must reconcile cash flows to the income statement and balance sheet if the indirect method is used the cash flow from the operations section is already presented as a reconciliation of the three financial statements other reconciliations turn non gaap measures such as earnings before interest taxes depreciation and amortization ebitda into their gaap approved counterparts 