What is a reconciliation workpaper?

Definition

A reconciliation workpaper is the documented file that shows how a reconciled balance was proven. In the books, it is the page or packet that sits behind an account and lets a later reader see the ledger number, the independent support, and every reconciling item in between.

The proof is the act of tying the two sides. The workpaper is the record of that proof.

Where it shows up

Balance Sheet: Related to the documented proof behind a reconciled account.

P&L: Related to the documented proof when an income or expense account is reconciled.

Cash flow: Related to the documented proof behind the cash reconciliation.

See also: Account Reconciliation · Supporting Schedule · Audit Trail

You will not find this file as a line on the Balance Sheet. It lives in the close binder, the shared drive, or the workpaper folder, one file per account that was proven.

Income and expense accounts on the Income Statement get a file only when those accounts are proven the same way. Most files still sit behind point-in-time balances that carry into the next accounting period.

Cash flow is involved when the file is the cash proof. The bank reconciliation packet is the cash version of this same document.

How it works

A complete file usually shows four things: the ending balance from the general ledger, the independent support for the same date, the list of reconciling items, and a conclusion that the account is proven or not.

Independent support is attached or referenced: a tank count, a bank statement, a subledger, a policy schedule, or another source document. The file should make that support easy to find without opening a second scavenger hunt.

Reconciling items are named, dated, and totaled. Each one is either a timing difference that will clear, an error that needs an adjusting journal entry, or a leftover that is still a reconciliation discrepancy.

The audit trail runs through this file. A later reviewer should be able to go from the reported number to the ledger, then to the support, without guessing what the bookkeeper saw.

Internal controls usually require a preparer name, a date, and sometimes a reviewer sign-off. The close checklist often points to these files as the evidence that the month-end close proofs are done.

The file is not the same as a detail worksheet that merely breaks a line into parts. A detail list can feed the proof; the workpaper is the proof itself, with both sides and the bridge between them.

Example

A brewery's finished-goods account shows $9,000 in the ledger at June 30. The tank count on the same date comes to $8,700.

The bookkeeper builds a one-page file. It shows the $9,000 ledger balance, the $8,700 tank count, and two reconciling items: $200 of packaged beer still in the cooler and $100 of beer pulled for a taproom event after the count.

Those two items add to $300. Ledger $9,000 minus support $8,700 minus items $300 leaves zero, so the account is proven.

The file keeps the tank count sheet and the two item notes with it. A reviewer in July can open one page and see how $9,000 of inventory was tied out, without rebuilding the work.

If one of those items had been unexplained, the file would still exist, but it would flag a discrepancy instead of a clean proof. The statements would wait until that leftover was named or adjusted.

Common mix-ups

This file versus the act of reconciling. The reconciliation is the work of proving a ledger balance to support; the workpaper is the document that shows how that proof was done.

This file versus a supporting schedule. A supporting schedule details a single line, such as remaining prepaid months; it does not by itself tie the ledger to independent support and list reconciling items.

This file versus an audit trail. The audit trail is the chain from a reported number back to its source; the workpaper is one document in that chain, not the chain itself.

Related terms

• Account Reconciliation: Proving that a ledger balance agrees to independent support.
• Supporting Schedule: A detailed worksheet backing up a single line on the financial statements.
• Audit Trail: The traceable chain from a reported number back to its source document.
• Balance Sheet Reconciliation: Reconciling every balance-sheet account as part of the close.
• Reconciliation Discrepancy: An unexplained difference left after a reconciliation is attempted.
• Audit: An independent examination giving an opinion on whether statements are fairly stated.
• Source Document: The original receipt, bill, or statement that supports an entry.
• Close Checklist: The task-by-task list of everything that must be done to close a period.