Because the world we live in has become so automated, we often overlook the fundamental basics of certain parts of our jobs. Often we know, inherently, what something is and how it works, but when asked to provide an explanation, we struggle to articulate the meaning. So we’ve put together this back to basics document that describes ledgers, balancing and reconciliations as it helps to position DataRapt’s function as an integral part of the SYSPRO ERP offering.

What is a sub-ledger?

The sub-ledger or subsidiary ledger contains the detail to support a General Ledger control account.

For example, an Accounts Receivable sub-ledger contains an account for each customer and holds all the transactions i.e. invoices, credit notes, payments etc. that have been processed against them. Without the sub-ledger, you would need to have a General Ledger account per customer in the General Ledger. This would be hugely cumbersome so instead the sub-ledger contains the detail and the General Ledger control account, the summary.

What is a control account?

A control account is a summary account in the General Ledger. The underlying details that make up the balance in the control account exist in a sub-ledger or subsidiary ledger, which is a ledger separate to the General Ledger.

What does it mean to reconcile a sub-ledger to the General Ledger?

The closing balance for each period in the sub-ledger must match the balance of the corresponding control accounts. Ensuring that they do is important because it proves that the General Ledger figure for the sub-ledger is accurate.

Reconciling your sub-ledgers to your General Ledger should be conducted at least monthly as part of the month end routine. But with a product like DataRapt, there is no reason why you can’t reconcile daily as the reconciling can be automated and the results emailed to a responsible person. The sooner a problem is flagged up the easier it is to trace and resolve.

If the reconciliation is not performed and there turns out to be an error in the General Ledger, this means there could be a material inaccuracy in the financial statements.

Why must the sub-ledger and GL balance?

• Because imbalances may be a symptom that the company is not as healthy as is shown on the Balance Sheet.
• Because it is quite possible that assets and/or working capital are seriously under or overstated as a result of ledger entries being either incorrect or incomplete.
• Because correcting entries could impact directly on the company’s revenue reserves.
• Because the errors could lie in the sub-ledgers meaning, for example, that customers receive inaccurate statements, or suppliers are over or under paid.

When Imbalances occur, questions are immediately raised by management;

• Why is there a difference and why do we only know about it now?
• Which balance is correct or are both wrong?
• What correcting entries are required to resolve any imbalances and what effect will they have on profits?

The DataRapt solution quickly and efficiently provides the means to answer the above questions and provides guidelines on how to resolve the differences.

How do you perform a reconciliation?

Well, that depends on whether you are performing the reconciliation manually or with DataRapt.

If you are performing the reconciliation manually then you:

1. First need to make sure that all the sub-ledger journals have been posted to the General Ledger.
2. Then you can begin to check whether the control accounts for each module balance to the sub-ledger.To do this you will need to get the sub-ledger balance. You will then need to establish which control accounts are used by each module and then get the account balance(s).
3. Now you can compare the sub-ledger balance to the control accounts to see if there’s a difference.

If you are performing the reconciliation using DataRapt then you:

1. Refresh the data and immediately see if there is an imbalance between any of the sub-ledgers and the General Ledger. The data can also be refreshed unattended after hours and the results emailed to a responsible person.

 

What do you do if they don’t balance?

Again it depends on whether you are performing the reconciliation manually or with DataRapt.

If you are performing the reconciliation manually and there is an imbalance between the sub-ledger and the General Ledger then you will have start investigating. You will need to find both the source of the variance and then correct it.

If you are performing the reconciliation using DataRapt then you can remedy the individual variances identified as causing the imbalance with the help of our ‘What Next?’ facility, which provides information about what may have caused the variance and offers suggestions to resolve it.

Why should you use DataRapt to reconcile?

Read our document that provides 12 reasons to use DataRapt.