Copyright 2004 - Account-Reconciliations.com, Inc.Slide 1 Account Reconciliation Training Presented by: RecWizard

Copyright 2004 - Account-Reconciliations.com, Inc. Slide 1

Account Reconciliation Training

Presented by:

RecWizard

Copyright 2004 – Account-Reconciliations.com, Inc. Slide 2

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.


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.


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.


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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”.


How do you do it all?

Introducing…

RecWizard


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


Templates

Designed to prompt you to gathering the correct information List Calculated Balance Subledger Match Amortizable Prepaid Checking Account


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


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)


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


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


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


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


List Reconciliation Type

1009 – Petty Cash Documentation is primarily narrative and

explanatory text

Review of actual account in the RecWizard program.


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



Subledger Match Reconciliation Type

1100 – Accounts Receivable Documentation support is provided by a

copy of the Aged Trial Balance report



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



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



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


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


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


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

Copyright 2004 - Account-Reconciliations.com, Inc. Slide 38

Thank you for your time.