Understanding Reconciliation
Reconciliation is the process of ensuring that two sets of records (usually the balances of two accounts) are in agreement. In Kezi, this primarily refers to Bank Reconciliation: matching your internal accounting records against your actual bank statements.
Why Reconcile?
Reconciliation is a critical internal control that ensures your records are accurate and complete. It helps you:
- Verify Accuracy: Ensure that every transaction on your bank statement is recorded in your books.
- Detect Errors: Find mistakes made by the bank or within your own data entry.
- Prevent Fraud: Identify unauthorized transactions.
- Monitor Cash Flow: Know exactly how much "real" cash you have available.
The Reconciliation Flow
Kezi uses a two-step "Outstanding" flow to maintain high-integrity double-entry accounting. This ensures that the debt is cleared when the check is written, but the cash is only reduced when the bank actually clears it.
1. Recording the Internal Payment
When you pay a vendor or receive money from a customer, you record a Payment.
- Financial Impact: The balance moves from the Partner Account (A/P or A/R) to an Outstanding Account.
- Status:
Confirmed. - Journal Entry Example (Vendor Payment):
- Debit: Accounts Payable
- Credit: Outstanding Payments
2. Matching with Bank Statement
When you receive your bank statement, you use the Reconciliation Matcher to link it to the confirmed payment.
- Financial Impact: The balance moves from the Outstanding Account to the actual Bank Account.
- Status:
Reconciled. - Journal Entry Example:
- Debit: Outstanding Payments
- Credit: Bank Account
Direct Reconciliation (Write-offs)
Sometimes, you might have a bank transaction that doesn't have a pre-recorded internal payment (like bank fees or interest). In these cases, you can perform a Direct Reconciliation (Write-off).
- I.e., you "write off" the statement line directly to an expense or income account.
- Journal Entry (Bank Fee):
- Debit: Bank Service Charges
- Credit: Bank Account
Key Concepts
| Concept | Description |
|---|---|
| Outstanding Account | A temporary account used to hold a balance until it is confirmed by the bank. |
| Statement Line | An individual transaction from a bank statement. |
| Matcher | The visual interface used to link statement lines with internal payments. |
| Reconciled | The final state where internal records and bank records agree. |