How to Reconcile a Balance Sheet

To reconcile a balance sheet, compare each account, assets, liabilities, and equity, with supporting documents such as bank statements, loan records, and invoices. This process ensures your books reflect the true financial position of your business. Verify that every transaction is recorded, then investigate discrepancies between balances and source documents. Once differences are identified, adjust entries or correct errors to maintain accuracy. Regular reconciliation helps you detect fraud, avoid financial misstatements, and keep your business audit-ready.

Gather All Supporting Financial Documents

To start reconciling your balance sheet, collect all relevant financial records. You’ll need:

• Bank statements
• Credit card statements
• Loan and lease documents
• Accounts receivable and payable ledgers
• Payroll and tax records

Having these documents ensures every transaction on your balance sheet can be matched and verified against real data.

Verify Opening Balances

Before reviewing new transactions, make sure your beginning balances are correct. These should match the ending balances from the previous accounting period.
If there’s a mismatch, check for:

• Transactions recorded in the wrong period
• Journal entries that were backdated or deleted
• Changes made after closing the prior period

Correct any discrepancies before moving forward to avoid carrying errors into the current reconciliation.

Reconcile Cash and Bank Accounts

Start with your bank accounts since they’re usually the easiest to verify.
Steps:

1. Compare your general ledger cash balance with your bank statement.
2. Identify outstanding checks and deposits in transit.
3. Adjust for any bank fees or interest income not yet recorded.
4. Ensure the adjusted bank balance matches your general ledger balance.

If they don’t match, list the differences and investigate, common issues include duplicate transactions or missed entries.

Match Accounts Receivable Balances

Next, reconcile your accounts receivable. The goal is to ensure that the total on your balance sheet matches the sum of your customer accounts.
Check for:

• Invoices not yet recorded or double-entered
• Payments applied to the wrong invoice
• Write-offs not reflected in the general ledger

Use an aging report to confirm the details. For instance, if your balance sheet shows $48,000 in receivables but your customer report totals $47,500, look for an unposted invoice or misapplied payment worth $500.

Reconcile Accounts Payable

For accounts payable, verify that the total on your balance sheet matches your vendor reports.

• Match each vendor balance to open bills and recent payments.
• Check for duplicate entries or missing invoices.
• Verify that credits and refunds are correctly applied.

This helps ensure you’re not overstating liabilities or missing outstanding bills.

Review Fixed Assets and Depreciation

Fixed assets such as vehicles, equipment, and buildings require special attention.

• Confirm that all acquisitions and disposals are properly recorded.
• Review your depreciation schedule to make sure monthly depreciation aligns with your accounting policy.
• Compare your general ledger balances to your fixed asset register.

Example: If your fixed asset register shows $150,000 in total assets, but your ledger lists $152,000, you might have an unrecorded disposal or an incorrect depreciation entry.

Verify Loan and Liability Accounts

Reconcile all loan accounts and long-term liabilities to ensure accuracy.

• Compare each loan’s balance to the lender’s statement.
• Make sure interest and principal payments are properly split in your journal entries.
• Check for accrued interest that hasn’t yet been recorded.

Maintaining correct liability balances helps ensure your balance sheet accurately represents debt obligations.

Confirm Equity and Retained Earnings

Lastly, review the equity section.

• Confirm that owner’s contributions, dividends, and retained earnings align with income statements and prior balance sheets.
• Verify that all closing entries from your profit and loss statement are properly posted to retained earnings.

Any inconsistencies here can distort your company’s overall financial health, so take the time to validate each entry.

Generate and Review the Reconciled Balance Sheet

Once all accounts are reconciled, generate a new balance sheet report. Review it carefully for:

• Correct totals for assets, liabilities, and equity
• No unexplained variances or rounding errors
• Supporting documentation for all balances

If everything checks out, document the reconciliation date and preparer for audit trail purposes.

Simplify Reconciliation with DepositFix

Manually reconciling balance sheet accounts can be time-consuming, especially when managing payments, invoices, and deposits across multiple systems. DepositFix helps automate payment tracking and revenue recognition, reducing the manual effort involved in your reconciliation process.

With DepositFix, you can:

• Automatically record ACH, debit, and credit card transactions
• Sync payment data directly into your accounting records
• Eliminate manual data entry and minimize reconciliation errors
• Gain real-time visibility into income and cash flow

Automating reconciliation with DepositFix ensures accurate financial records, faster month-end closings, and more time for strategic decision-making.