Key points
General ledger reconciliation proves each ledger balance is supported by evidence from outside the ledger.
It runs at four levels: account, subledger, whole ledger, and, for groups, between entities.
Every difference is either a timing item that clears next period or an error that needs a journal entry now.
An aging rule for reconciling items stops timing items from hiding real errors.
Auditors expect a reviewed reconciliation for every material account, with support attached.
What general ledger reconciliation means
General ledger reconciliation is the period-end work of proving that every balance in the ledger is supported by something outside it. Support can be a bank statement, a subledger, a schedule, a contract, or a confirmation. Any difference is explained, and errors are fixed with journal entries.
It works at two levels. Account by account, each balance ties to its support. Across the whole ledger, the trial balance balances and ties to the financial statements. Most guides cover only the first.
Account level and ledger level
Level | What you prove | Typical evidence |
|---|---|---|
Account level | Each balance sheet account equals its independent support | Bank statement, AR aging, revenue schedule, asset register |
Subledger level | Control accounts equal their subledger totals | Subledger report run as of period end |
Ledger level | Total debits equal total credits; trial balance ties to statements | Trial balance and statement tie-out |
Entity level | Intercompany balances agree between entities | Intercompany matrix |
The account-level method itself is covered in account reconciliation. This page focuses on running it across the whole ledger and clearing what you find.
Worked example: deferred revenue
Fieldnote AI, a fictional Series B company with usage-based pricing, reconciles deferred revenue at October 31. The GL shows $1,140,000. The revenue schedule, built contract by contract, shows $1,104,000. The figures are illustrative.
Item | Amount | Type |
|---|---|---|
Deferred revenue per GL | 1,140,000 | |
October release not posted for one annual contract | (30,000) | Error |
Credit memo posted to revenue instead of deferred revenue | (6,000) | Error |
Adjusted GL balance | 1,104,000 | |
Deferred revenue per schedule | 1,104,000 | |
Unexplained difference | 0 |
Both items are errors, so both need entries before the period locks.
Account | Debit | Credit |
|---|---|---|
Deferred revenue | 30,000 | |
Subscription revenue | 30,000 | |
Deferred revenue | 6,000 | |
Subscription revenue | 6,000 | |
Total | 36,000 | 36,000 |
The second entry reverses the misposting. The credit memo should have reduced deferred revenue, not revenue. Net effect on October revenue: up $36,000.
Timing items vs errors
Timing item | Error | |
|---|---|---|
Example | Deposit in transit; payment applied in GL before billing system | Wrong account, missed entry, duplicate |
Journal entry now? | No | Yes |
Should clear by | Next period | This period |
If it does not clear | Reclassify as an error and investigate | Escalate to the controller |
A simple aging rule keeps timing items honest. One common internal policy: explain items under 30 days, escalate items 31 to 60 days old, and resolve or write off anything older with documented approval. Set your own thresholds using materiality, and write them down.
Ledger-level tie-out, step by step
Run the trial balance as of period end and confirm debits equal credits.
List every balance sheet account with a non-zero balance or activity. Each needs a reconciliation.
Tie each control account to its subledger report run as of the same date.
Reconcile each account to its support and classify differences as timing or error.
Book entries for errors; carry timing items with an expected clear date.
For multi-entity groups, confirm intercompany balances match before intercompany eliminations.
Rerun the trial balance and tie it to the balance sheet and income statement.
Have a reviewer sign and date every reconciliation.
What auditors and boards look for
Public companies must keep books that accurately and fairly reflect their transactions, under Section 13(b)(2) of the Securities Exchange Act. Private startups are not bound by that section, but their auditors test the same thing. They look for a reconciliation for every material account, prepared and reviewed by different people, with old reconciling items explained.
A reconciliation that shows "difference: 0" with no support attached does not count. Neither does one signed after the auditor asked for it.
Common mistakes
Reconciling to another ledger report. Support has to come from outside the GL. A GL detail report is not independent evidence.
Plugging the difference. A "reconciliation adjustment" with no explanation moves the problem; it does not solve it.
Skipping zero-balance accounts. An account that should have a balance but shows zero can hide a missing entry.
Running support and GL at different dates. A subledger pulled on day 3 includes day 1 to 3 activity. Run both as of the period end.
How Quanta handles GL reconciliation
Quanta's in-house accounting team keeps the ledger and reconciles it each close. Integrations into the customer's usage database, Stripe, Ramp, Rippling and cloud bills give each account support from the source system. Balances trace back to journal entries, which is what an auditor needs to follow a number.
Quanta perspective
The reconciliation that catches the most at usage-based companies is deferred revenue against a contract-by-contract schedule, not cash. Cash reconciles itself through the bank. Deferred revenue only reconciles if someone rebuilds it from contracts, credits, and usage drawdowns every month.
Frequently asked questions
How often should the general ledger be reconciled?
Balance sheet accounts are typically reconciled monthly as part of the close. High-volume accounts like cash may be reconciled more often, and some low-activity accounts quarterly, if policy allows.
What is the difference between GL reconciliation and account reconciliation?
Account reconciliation ties one account to its support. General ledger reconciliation applies that across every account and adds ledger-level checks, like the trial balance tying to the statements.
What is a reconciling item?
A reconciling item is a known, explained difference between the ledger and the support. It is either a timing difference that will clear or an error that needs a correcting entry.
Who should review GL reconciliations?
Someone other than the preparer, usually the controller. The reviewer signs and dates the reconciliation after checking support and the explanation of each item.
Can GL reconciliation be automated?
Matching and data pulls can be automated for high-volume accounts like cash and AR. Judgment on estimates, classification, and unusual items still needs a person.