Ooh! A Can-o-Worms to munch on! (I promise to only nibble)
On 12/14/22 4:49 PM, Jim DeLaHunt wrote:
On 2022-12-14 02:58, Dr. David Kirkby wrote:
My understanding is that the purpose of the reconciliation is to
enable one
to compare that the balances of two sets of accounts are in agreement....
Interesting. I have slightly different purpose when I do reconciliation:
to compare the _transactions_ of the two sets of accounts, and confirm
they are in agreement.
Funny thing about 'interesting' 'understandings'...there are always
other perspectives...
Mine is that the purpose of reconciliation is to verify: that the
starting balance, mathematically results in the ending balance, (both of
which are 'as reported' by the 'other' entity, usually a bank of some
sort) as a consequence of the listed transactions, which hopefully, by
the reconciliation process, you verify are real and constitute
legitimate activity affecting your account with said entity.
In such a pristine world, the Starting Balance is always the last Ending
Balance, and since there is no pristine world, the new Ending Balance
will never match your own, but if you are lucky, you can obtain it by
math via the listed transactions from the bank/entity. This makes the
new Ending Balance, (remember, this will become a new Starting Balance
next period) otherwise pointless and useless, and is nothing to fret
over, nor should it be allowed to raise your blood pressure or cause you
stress. It is merely the result of a math problem where no sane rules
determine the operands.
The one exception: at the moment
the account is created, both my records and the bank's account agree
that the balance is zero.
I will be obnoxious here: perhaps the agreed initial balance is instead
$50, £50, €50, et cetera depending on the opening deposit that creates
the account as I highly doubt anyone would contractually consider an
account 'created' if it had zero balance. (a technical legal thing, I
know, but recall, I'm being obnoxious, and doing so with fair warning.)
I do agree, however sadly the fact is, that this initial balance is
likely the only time you and the bank/entity will ever agree on any
balance on any particular day. (and even that is not guaranteed!)
Most of the time, the only date on which I care about what the bank says
my balance is, is the statement ending date. And I don't care what my
own book's balance for that account is on that date. I just care that
each transaction the bank says occurred during that statement period
matches exactly one transaction in my own books.
Yeah, what I just noted above: the 'purpose' of reconciliation is to
verify: that 'A' + 'a bunch of specific stuff' = 'B', as long as you
have *at least* the exact same list of 'a bunch of specific stuff'. The
fact that either you or the bank has any knowledge of 'other specific
stuff' is entirely irrelevant to reconciliation. (at least for this period!)
And I hope none of that is too pedantic for anyone's taste. I'm just
offering another perspective. (the obnoxious part above was just for
fun, by the way)
Regards,
Adrien
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