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

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

Test Question: What is a reconciliation? Something required by Sarbanes-Oxley that was not important before 2001. Part of my job duties that wastes time. A means of creating stress between my supervisor and me. An analysis of an account balance that explains what the balance is, why it is there, and that it is adequate. Copyright 2004 – Account-Reconciliations.com, Inc.

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

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 Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

Clearly identified information that 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 Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

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”. Copyright 2004 – Account-Reconciliations.com, Inc.

RecWizard How do you do it all? Introducing… Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

Templates Designed to prompt you to gathering the correct information List Calculated Balance Subledger Match Amortizable Prepaid Checking Account Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

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) Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

List Reconciliation Type 1009 – Petty Cash Documentation is primarily narrative and explanatory text Review of actual account in the RecWizard program. Copyright 2004 – Account-Reconciliations.com, Inc.

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 Review of actual account in the RecWizard program. Copyright 2004 – Account-Reconciliations.com, Inc.

Subledger Match Reconciliation Type 1100 – Accounts Receivable Documentation support is provided by a copy of the Aged Trial Balance report Review of actual account in the RecWizard program. Copyright 2004 – Account-Reconciliations.com, Inc.

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 Review of actual account in the RecWizard program. Copyright 2004 – Account-Reconciliations.com, Inc.

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 Review of actual account in the RecWizard program. Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

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 Copyright 2004 – Account-Reconciliations.com, Inc.

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: support@recwizard.com Mail: 7 Nicklaus Lane Farmingdale, NJ 07727 Copyright 2004 – Account-Reconciliations.com, Inc.

Thank you for your time. Copyright 2004 - Account-Reconciliations.com, Inc.