Assets, object codes beginning with 1xxx, are defined as economic resources owned by the university, (e.g. cash, investments, accounts receivable sponsored/travel, inventory, building and equipment). Liabilities, object codes beginning with 2xxx, are defined as debts or obligations of the university (e.g. accounts payable, deferred revenue, bond/debt obligations).
Reconciliations should be completed for all asset and liability object codes, based on the unit's level of activity or business cycle. General guidelines dictate that if activity is posted monthly, the reconciliation is to be completed monthly. Please refer to the list of object codes (XLSX, 16 KB) that recommends the frequency of reconciliation for asset and liability object codes. It is up to each unit to create guidelines for frequency of reconciliation per unit if more stringent than DFS guidelines.
It is important to realize that the asset/liability reconciliation needs to be completed for each object code posted to an account, not the account balance identified as the cash offset object code balance. Also, if a reconciliation is completed at the consolidated level, the sub-accounts or sub-objects may be incorrect if not included as part of the reconciliation process.
Adjustments or errors should be corrected as soon as discovered, usually the period after the original entry was posted. The natural classification for assets is a debit balance (with the exception of a contra asset, e.g., allowance for doubtful accounts or accumulated depreciation) and for liabilities it is a credit balance. Therefore, the wrong natural balance for assets (with the exception of a contra asset) is a credit balance, and for liabilities it is a debit balance. It is important to pay particular attention to balances that do not have the correct natural classification.
It is good internal control practice to have evidence that the reconciliations have been reviewed. It is up to each unit to create guidelines for the approver and evidence of review.
What is a reconciliation?
The term reconciliation frequently refers to a process of comparing two systems. For example, comparing the general ledger with another source, typically a subsidiary ledger, statement, or other source document (e.g., Bursar System or UVIS for the Vet School).
We will be using the term reconciliation loosely, because not all asset and liability object codes will tie to a second system.It can also refer to any of the following:
- Proving or documenting that an asset or liability object code balance is correct.
- A justification of the ending balance, it is not a listing of the transactions posted.
- For example, an accounts receivable travel object code reconciliation should contain a list of travelers who have been issued a travel advance and the amount due that ties to the object code ending balance.
An object code should be considered reconciled when differences have been investigated, proper treatment determined, and correcting e-docs have been posted to the general ledger or corrections made to the sub-ledger.
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What should be included on a reconciliation?
- The account, account name, object code, date, and the name of person completing the reconciliation. Note that the sub-account and sub-object codes may also be included in the reconciliation.
- The approver's signature and date.
- The general ledger (GL) balance and, if reconciling to a subsidiary ledger or another source, the ending balance of the source document.
The reconciliation should begin by comparing the ending balance in the general ledger with the ending balance in the sub-ledger or supporting details and it should finish with matching adjusted balance for each.
Refer to sample reconciliation template and accounts receivable travel reconciliation example (XLSX, 33 KB).
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General guidelines
The following are guidelines for completing a reconciliation. If you need a template for completing your reconciliation, see our reconciliation template (XLSX, 33 KB).
- Asset object codes should have a debit balance unless they are for a contra asset.
- Liability object codes should have a credit balance.
- DFS will maintain a list of asset and liability object codes (XLSX, 16 KB) that references the responsible parties, frequency and type of reconciliation.
- Units are responsible for reconciling the following:
- Assets: petty cash, cash drawers, accounts receivable (with the exception of sponsored and student accounts receivable), inventories, prepaid expenses, allowances for doubtful accounts, and accruals.
- Liabilities: accounts payable, accrued expenses, deferred revenues/expenses, and sales tax.
Units do not need to reconcile the generated offset object codes 1000 and 2900.
- Central offices are responsible for reconciling the following:
- Assets: cash offset (1000), cash in bank, investments, sponsored & student accounts, and contribution (pledge) receivable, capital assets, funds held in trust, and internal loan assets.
- Liabilities: accounts payable offset (2900), obligations under split agreements, deferred benefits, funds held in trust for others, bonds and notes payable, government advances, and internal loan liabilities.
- Object codes with a year-to-date balance of zero do not require a reconciliation.
- If external auditors (PricewaterhouseCoopers), the University Audit Office, or DFS requests a copy of a reconciliation, the expectation is that the reconciliation:
- Will be available within two business days.
- Should already have been completed, not done solely because of the request.
- Evidence of review; by whom and when.
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What is the best way to review accounts with asset/liability object code balances?
- KFS Dashboard – University Fiscal Year End – Asset and Liability Activity
- This view provides high-level review of accounts with asset and liability balance. The report contains Beginning Balance Actuals, YTD Actuals and To Date Actuals. TIP: Select Org Type then Parent Org. You can also link to YTD transactions.
- KFS Dashboard – Financial Activity
- Balance by Org - Accounts – Trial Balance (5th report) includes a list of object codes and reports: Beginning Balance, YTD Activity, and YTD Balance.
- Object – contains YTD Actuals by object codes. You can select object codes 1xxx through 2xxx.
- Transaction – use to research detailed transactions
- KFS Application: Access the General Ledger Balance screen on the KFS Main Menu tab, under Balance Inquiries.
- You are only able to review one account at a time. However, you can use this very powerful tool to drill down to review activity.
- Helpful reconciliation TIPS:
- Click on an amount in any given period. The application will return a list of e-docs that make up the monthly total. Click on the document number to review the e-doc.
- For the amount view option, select accumulate. This feature adds the beginning of period balance (BB) and the current year activity to provide the to-date balance. If monthly is checked, remember to add the Beginning Balance Line Amount and the Account Line Annual Balance Amount to get the to-date balance.
- Negative amounts reduce the balance, positive amounts increase the balance.
- A negative to-date balance is the wrong natural balance. Generally, assets, liability, and revenue and expenses should have positive to-date balances.
- When correcting an object code error, save the e-doc before submitting it to make sure the e-doc is having the desired effect on the balance. There are two options available:
- Show general ledger pending entries to review debit/credit entries. Click on the search icon to download results to Excel if the e-doc is large.
- Go to the General Ledger Balance inquiry on the main menu. Enter the chart, account, and object code. Select Include Pending Ledger Entry – All. Review the to-date balance, in the monthly buckets.
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