Account
Reconciliation
Training
The University of
Texas-System
The University of
Texas – Pan American
Course Objective
This course consists of two primary objectives:
1. To inform reconcilers of all resources
needed to perform a proper reconciliation,
and to provide background on these
resources
2. To provide a step-by-step guide to a proper
and complete account reconciliation
Background
What is an account
reconciliation?
An account reconciliation is a comparison of two
sets of information: 1) the accounting statement
plus the payroll statement from Personnel, and 2)
support documentation for departmental
transactions. You could compare this process to
the balancing of your checkbook – each
transaction in the bank statement (represented by
the accounting statement) should be matched
against your checkbook (the support
documentation)
Why reconcile departmental
accounts?
To ensure that the expenditures which have been
charged to the department’s accounts were properly
approved and charged to the correct account.
To ensure that all revenues which have been
earned/collected by the department have been
credited to the correct account.
This control activity helps to ensure the accuracy
and completeness of transactions which have been
posted to the department’s accounts.
Why reconcile departmental
accounts? (continued)
In order to check for accuracy and completeness,
reconcilers must make certain that each transaction
posted in the statement of account has a match in the
department’s support documentation.
Simultaneously, each transaction found in the
support documentation must have a match in the
statement of account. Matching transactions must
be consistent in dollar amount. Items that do not
match or have different dollar amounts are
reconciling items and must be explained.
Why reconcile departmental
accounts? (continued)
Other important goals of the reconciliation
process include:
1. To provide the account manager with an
accurate amount for the remaining (available)
budget balance
2. To make certain that each transaction that
affects the account has been properly
approved
Who should prepare account
reconciliations?
To ensure proper segregation of duties, the person who
approves expenditures or handles cash generally should not
prepare the account reconciliations.
It is best for reconciliations to be prepared by the
department’s support staff, but reviewed and approved by the
account manager. In situations where the account manager is
the only employee available to perform reconciliations,
he/she may reconcile.
The account manager should provide the reconciler with
copies of all support documentation for transactions.
When should account
reconciliations be prepared?
Departmental account reconciliations should
be prepared monthly and preferably within
two weeks of the receipt of the Statement of
Account.
Reconciliation reports should be kept on file
in your department for audit purposes.
Types of Transactions
You will encounter the following types of transactions
in the accounting system:
1. Revenue transactions
2. Expenditure transactions
3. Encumbrance transactions
4. Budget changes and carryforwards
The department should maintain support documentation for
each of these types of transactions.
Support Documentation
Each type of transaction has several different types of
support documentation. Examples include:
1. Budget changes and carryforwards – budget change
forms, or documentation of budget at beginning of
fiscal year
2. Expenditures – invoices, report of phone charges,
packing slips, travel vouchers, receipts, etc.
3. Encumbrances – small purchase orders,
departmental purchase requisitions, purchase orders,
travel applications, etc.
4. Revenue – deposit receipts, etc.
Types of University
Accounts
University Account Structure
A University account number consists of six digits; the first
digit reveals the specific type of account. For example,
accounts beginning with the number “1”, such as 111001, are
considered state fund accounts. Different types of accounts
receive funding from different sources, and each account type
has distinct spending restrictions.
“1” Accounts – State Funds
State fund accounts primarily receive funding from the following two
sources:
State Appropriations
Tuition
All expenditures made from these accounts must support activities that represent the
primary functions of an institution such as:
Education, Research, Academic Support
Institutional Support, Operation and Maintenance of Plant
Examples of expenditures that do not support these activities include:
Advance payments for goods or services before their delivery
(exceptions: newspaper/magazine subscriptions, seminars)
Money, goods, or services to a charitable organization
Food, coffee, cream, sugar and similar items that employees or visitors
would consume
Plants, flowers, or floral arrangements
Awards in excess of $50
“2” Accounts – Designated or
Local Funds
These funds have been internally designated by University management or by
the Board of Regents for a specific use (which must be an educational
purpose). The internal designation may be removed or altered at
management’s discretion. No broad set of restrictions exists for these
accounts, but expenditures made must comply with the specific purpose of the
account. Primary uses of designated funds include instruction and
institutional support.
Designated fund accounts primarily receive funding from the following two
sources:
Tuition – designated (formerly general use fee)
Sales and services of educational activities
Fees
“3” Accounts – Auxiliary or
Student Services
An auxiliary enterprise exists to furnish goods or services to students,
faculty, or staff, and it assesses a charge directly related to, although
not necessarily equal to, the costs of the goods or services. The
distinguishing characteristic of an auxiliary enterprise is that it is
managed as an essentially self-supporting activity – it finances its
operations through its own revenues. Examples include:
Athletic
Food
programs
services
Dormitories
Expenditures made from auxiliary accounts must correspond to the
service the particular department provides.
“5” Accounts – Restricted
Funds
Funding for these accounts consists
primarily of gifts, contracts, and grant funds
from federal, state, local, or private donors;
these funds are restricted by the donor as to
how they are spent.
Expenditures made from these accounts
must comply with the restrictions set forth
by the donor.
Examples of Unallowable
Transactions for “5” Accounts
Alcohol
Entertainment
Fines
Donations
Goods and services for
personal use
Fundraising
Lobbying
Memberships in civic,
social, or community
organizations or country
clubs
Proposal costs
Refreshments/food –
unless specifically
approved by funding
agency
Other University Accounts
In addition to the University accounts covered on the previous slides,
reconcilers may encounter other types of accounts.
Loan fund accounts are designated as “6” accounts. These accounts maintain
the resources that are available to make financial aid loans to students.
Plant fund accounts are designated as “7” accounts. These account for the
resources that are committed to fund capital projects approved by the Board
of Regents, such as construction of a building or renovation of existing
facilities.
Agency fund accounts are designated as “8” accounts. These funds are
owned by an outside entity or individuals, but the University is acting as their
custodian or fiscal agent.
Statements of Account
Monthly Statement of Account
The monthly statement of account is a
three-part report consisting of the
following:

Account Summary

Open Commitments (encumbrances)

Report of Transactions
Format of the Account Summary
Information in the account summary portion of the statement is
provided by object code. Totals are provided for each object code, for
groups of object codes, and for the account in total. An example of an
account summary is provided on the next slide.
This portion of the statement provides a summary of the account
budget and how it is being used. It summarizes the budget balance
itself, how much has been spent from the account, how much revenue
has been taken in, and how much has been encumbered to come to the
available (remaining) balance.
FBM090 - Account State me nt
10 digit Account #
T he date & time the
report was generated
and report ID #
4 digit # identifying the
category of revenue or
expense. See exhibit A.
Date Run 12/7/XXXX
T ime Run 03:24:21
FBM090 - A2
Sub
Code
1500
1700
20 Character description
3000
3276
3291
3300
3330
3334
3504
3605
3610
3625
3660
7100
7101
7102
7105
T otal Balances
T he University of T exas - Pan American
Financial Records System
Account Statement for 11/30/XX
Account Number = 114XXX0000
Acct.: 1-14XXX
Dept.: 02060
1210
Sub-totals
Statement for
Current Month
9000
9300
9400
Account T itle
Description
Original Budget increased/decreased by
Budget Changes, salary adj., & prior year
encumbrance carryforwards.
Open
Commitments
Classified
113,766.00
113,766.00
9,480.50
28,440.98
85,325.02
Salaries
113,766.00
113,766.00
9,480.50
28,440.98
10,000.00
0.00
10,000.00
3,345.49
6,654.51
10,000.00
0.00
814.94
814.94
0.00
1,569.62
1,569.62
Salaries, Wages & Ben
123,766.00
123,766.00
10,295.44
30,010.60
Operating Budg Pool
Communication Serv
Postal Services
Consumables
P&S Furnish & Equip
Noncap Noninv Frn/Eq
Phone Monthly Charge
Central Store IDT 's
Print Shop IDT 's
Physical Plant IDT 's
T x An Charges
21,535.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
17,885.22
319.52
8.12
1,123.40
1,050.01
1,054.25
171.35
456.61
455.45
4.13
62.56
0.00
23.71
3.64
514.04
27.24
0.00
52.95
46.58
455.45
0.00
40.25
0.00
106.13
8.12
1,122.03
912.51
430.95
171.35
456.61
455.45
4.13
62.56
Maint & Operating
21,535.00
22,590.62
1,163.86
T ravel Budget Pool
I/S - PubT rans Fares
I/S - Mileage
I/S - Incidental/Park
4,818.00
0.00
0.00
0.00
4,324.56
498.74
32.70
7.00
T ravel
4,818.00
Merchan Resale Pool
Print Shop Merch
Merch For Resale
4,842.00
0.00
0.00
Wage Pool
College Workstudy
Wages
23
FBM092
1
Balance
Available
Perc
Used
0.00
100
85,325.02
0.00
100
0.00
5,084.89
5,084.89
3,345.49
0.00
3,345.49
0
100
66
90,409.91
3,345.49
98
0.00
213.39
0.00
1.37
137.50
623.30
0.00
0.00
0.00
0.00
0.00
17,885.22
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0
100
100
100
100
100
100
100
100
100
100
3,729.84
975.56
17,885.22
21
0.00
0.00
32.70
0.00
0.00
498.74
32.70
7.00
0.00
0.00
0.00
0.00
4,324.56
0.00
0.00
0.00
0
100
100
100
Computation of [Revised Bdgt - Fiscal
4,863.00
32.70
538.44
0.00
4,324.56
11
Year or Project Year Actuals - Open
3,096.26
269.76
1,824.45
0.00
269.76
54.72
0.00
269.76
699.52
0.00
0.00
1,124.93
3,096.26
0.00
0.00
0
100
100
4,842.00
5,190.47
324.48
969.28
1,124.93
3,096.26
43
T otal Expenses
154,961.00
156,410.09
11,816.48
35,248.16
92,510.40
28,651.53
82
Account T otals
154,961.00
156,410.09
11,816.48
35,248.16
92,510.40
28,651.53
82
35,248.16
92,510.40
28,651.53
ACCOUNT BALANCE
Summary of
Current Month
T ransactions
Processed
Individual responsible
for this account & the
Campus Address
T o: Account Manager
ASB 1.126
------------------Budgets---------------- --------------Actuals-------------Current
Fiscal
Original
Revised
Month
Year
Merch For Resale
Budget allocation at the
Beginning of the Fiscal Year
Report Page
Program ID
Account Page
156,410.09
T his is a summary of your account supporting current month transactions.
T he detail is on FBM091. Please call Accounting with questions.
Summary of Cumulative T ransactions
Processed (Sept. 1 through report date)
Reflects percentage of
Revised Budget used or
encumbered from Sept. 1
through date of report
Commitments = Balance Available]
Reflects funds set aside to
be paid at a later date.
(ENCUMBRANCE)
Format of the Open
Commitments Status Report
This portion of the statement of account provides information on all
encumbrances open at the beginning of the month, and where they
currently stand. The next sheet provides an example of the open
commitments status report.
Encumbrances are account funds that are set aside as a result of a purchase
order, departmental requisition, travel application, etc., for a future
purchase. These funds have not yet been spent (no expenditure has been
recorded), but they have been set aside in anticipation of a future
expenditure.
Each outstanding encumbrance is listed, and they in order by object code.
This portion provides the original amount of the encumbrance,
expenditures and adjustments made against the encumbrance, and the
remaining amount of the encumbrance.
FBM090 - Account Statement [Continued]
Encumbrance Report
This order was paid or adjusted this
month and will not appear on this
statement the following month.
Open Commitments Status
Account # and
4 digit subcode
Encumbrance number:
P = Payroll/Position Control
Q = Interim Requisition
R = Requisitions
T = Travel
W = Work Order
Note: The second character
of this label represents the
fiscal year
Account
Ref. No.
Date
1-14XXX-1210
1-14XXX-1700
1-14XXX-3000
1-14XXX-3000
1-14XXX-3000
1-14XXX-3276
1-14XXX-3300
1-14XXX-3300
1-14XXX-3300
1-14XXX-3330
1-14XXX-3330
1-14XXX-3330
1-14XXX-3334
1-14XXX-3334
1-14XXX-7102
1-14XXX-9000
1-14XXX-9300
1-14XXX-9400
1-14XXX-9400
1-14XXX-9400
P000520
P000520
Q902938
Q903104
Q903106
R901020
R805694
R902104
R902168
R804335
R900354
R901957
R902103
R902655
T908154
Q903059
R902102
R900352
R900353
R902829
08/21
09/21
11/13
11/23
11/23
09/01
05/13
10/14
10/19
02/26
09/01
11/04
10/14
11/18
10/26
11/20
10/14
09/01
09/01
11/30
Description
Original
Amount
Liquidating
Expenditures
Pos Ctl Account Sum
108,549.00
Pos Ctl Account Sum
3,235.47
Req Commitment; No Vn
623.30
Req Commitment; No Vn
287.00
Req Commitment; No Vn
119.00
TCI Cablevision
260.81
Trevino's Studio & P
522.71
Texas Art Supply Inc.
393.00
Team Marketing Compa
75.00
Electrotex
22.77
Broadway Hardware
500.00
3M Safety & Security
23.88
USI, Inc.
249.89
MCM Electronics
623.30
Travel - Brownsville
32.70
Req Commitment; No Vn
527.42
Spiral Blinding Compa
269.76
Trevino's Studio & P
500.00
Lodico Electronics
500.00
School House Audio-V
527.42
** Account Total **
117,842.43
Adjustments
Current
Amount
0.00
0.00
0.00
0.00
0.00
71.13
521.34
414.52
79.22
0.00
885.27
27.24
271.04
0.00
32.70
0.00
269.76
90.80
311.69
0.00
-23,223.98
1,849.42
-623.30
-287.00
-119.00
23.71
0.00
21.52
4.22
0.00
500.00
3.36
21.15
0.00
0.00
-527.42
0.00
0.00
0.00
0.00
85,325.02
5,084.89
0.00
0.00
0.00
213.39
1.37
0.00
0.00
22.77
114.73
0.00
(0.00)
623.30
0.00
0.00
0.00
409.20
188.31
527.42
2,974.71
-22,357.32
92,510.40
Date
Completed
11/17/XX
11/24/XX
12/4/XX
11/23/XX
11/11/XX
11/18/XX
11/7/XX
11/13/XX
11/30/XX
11/3/XX
Reflects total outstanding
encumberance
Should equal to the Open
Commitments Column on
FBM090.
If you have questions on outstanding purchase orders, please call Accounts Payable.
Date of the transaction
20 character description of
the vender or misc information
The original amount
of the encumbrance
Expenditures or adjustments
posted to an existing
encumbrance.
Format of the Report of
Transactions
This portion of the Statement of Account provides information on each
transaction that affected the account during the month. The next slide
provides an example of a report of transactions.
When looking at dollar amounts on this sheet, keep in mind that negative
amounts are credited to your account and positive amounts are debited.
Therefore, revenue would show up as a negative amount, and an
expenditure would show up as a positive amount.
FBM091 - Report of Transactions
The date & time the
report was generated
and report ID #
Statement for Operating
Month
10 digit Account #
Date Run12/10/XX
Time Run10:20:31
FBM091
Sub
Code
1210
Date
TC
11/18
11/18
Pos Ctl Account Sum
Payroll Exp - 2R03
CM Total College Workstudy
11/06
11/06
11/23
11/23
11/17
11/24
12/04
3000
Req Commitment:ND VN
Req Commitment:ND VN
Req Commitment:ND VN
Req Commitment:ND VN
Req Commitment:ND VN
CM Total Oper & Maint
3276
3276
TCI Cablevision
CM Total Communication Serv
11/05
3291
3291
Postage
CM Total Postal Services
11/17
3300
11/30
11/23
11/11
11/27
3300
B.S 11/02-11/06
Texas Art Supply Inc.
Team Marketing Compa
Staff/Fac ID
Cm Total Consumables
3330
3330
3M Safety & Security
11/18
CM Total P7S- Furnish & Equip
064
3334
3334
MCM Electronics
11/18
CM Total Noncap Noninv Frn/Eq
050
1700
1700
3000
Report Page
Program ID
Account Page
Account Title
Pos Ctl Account Sum
Payroll Exp - 1R03
CM Total Classified
1210
20 Character description
of Transaction
Description
Adjustments to Encumbrances
The University of Texas - Pan American
Financial Records System
Report of Transactions for 11/30/XX
Account Number = 114XXX0000
Acct.: 1-14XXX
Dept.: 02060
4 digit # identifying the
category of revenue or
expense. See exhibit A.
Reflects amounts
processed through a
budget change
053
063
053
063
050
050
051
051
051
068
Ref.
2nd
Ref.
P000520
0000086
J.E. Offset
Account
To: Account Manager
AB 222
Budget
Entries
Ref.
Date
-9,480.50
0.00
-9,480.50
PC1801
LD1801
111898
111898
0.00
9,480.50
9,480.50
Q903104
Q903106
Q902938
Q903104
Q903106
R901020
Rev/Exp
-719.89
0.00
-719.89
PC0601
LD0605
110698
110698
0.00
814.94
814.94
PBF120
PBF120
PBF116
PBF121
PBF127
112398
112398
111798
112498
111798
0.00
0.00
287.00
119.00
-623.30
-287.00
-119.00
-623.30
23.71 P
23.71
-23.71
-23.71
ADF082
110598
0.00
3.64
3.64
0.00
0.00
AJVB78
111998
0.00
0.00
-393.00
-75.00
7.50
-460.50
AJVB92
PAF628
PAF628
AITB23
112398
112398
111098
113098
0.00
12.80
414.52 F
79.22 F
7.50
514.04
27.24 F
27.24
-23.88
-23.88
PAF628
111798
0.00
111898
0.00
623.30
623.30
PBF117
0.00
0000084
0-15000-1610 CR
9018
9019
R902655
R902794
9019
9973615
0-1110-2100 CR
Sub-totals
060
060
064
064
066
107438
107458
R902104
R902168
R901957
R902655
107438
107458
9974640
9973960
9916003
9974166
1-19XXX-3291 CR
3-10XXX-0680 CR
0-91902-1144 CR
0-91902-1144 CR
3-10XXX-0915 CR
0-91902-1144
Individual responsible
for this account & the
Campus Address
Batch
Commitments
0-11100-2410 CR
P000520
1543
FBM092
1
Q902938
6 digit accounting batch
Object Codes
An object code is a four-digit code that outlines the objective
of an expense or revenue transaction. It is often labeled as
“sub-code” on the statement of account.
Object Code Range
0001-0009
1000-1499
1500-1800
2000-2999
3000-3999
4000-4999
5000-5999
6000-6999
7100-7999
8000-8999
9000-9998
Expenditure or Income Class
Income for sales, fees, admissions,
interest, rentals, etc.
Expense - Salaries of Employees
Expense - Wages of Hourly
Employees
Expense - Fringe Benefits
Expense - Operating Costs
Expense - Books
Expense - Computer Services
Expense - Loans and Grants to
Students
Expense - Travel
Expense - Capital Outlay
Expense - Merchandise for Resale
Transaction Codes
A transaction code is a three-digit code that provides the
nature of the transaction (i.e., whether the transaction is a
revenue, expenditure, encumbrance, etc.)
Transaction Code
020
021, 022
026
031
050-059
060
061
062
063
064, 065, 068, 04x
066
067
098
Transaction Description
Original Budget Entries
Budget Revision/Transfer
Budget brought forward for Encumbrance
Electronic Funds Transfer (Direct Deposit)
Encumbrance
Journal Voucher
BRS Feeds (Billings & Receivables System)
Fixed Assets Feed
Payroll Disbursement
Disbursement Voucher
Interdepartmental Transfers
LMS Feeds (Loan Management System)
Beginning Balance Transactions
Reconciliation Process
Step 1 – Listing of Accounts
The person performing departmental account
reconciliations should obtain from Accounts Control (AB
217) a listing of all accounts which have been assigned to
the department, or to persons employed by the
department. The accuracy and completeness of the listing
of accounts should be confirmed at least annually.
Monthly Statements of Account are provided by
Accounts Control. If the department does not receive a
statement, the reconciler should contact that office to
request a copy. The department should not expect a
report if the account had no activity for the month.
Step 2 – Check Beginning
Balances
The reconciler must verify that the starting point (your
revised budget balance) is correct. If no budget changes
or budget carryforwards have affected the account during
the month, the revised budget balance (check the account
summary) for each group of object codes should match
that of the previous month.
If budget changes or carryforwards have been made, the
new revised budget balances should reflect those
changes. The reconciler must make certain that the
revised budget reflects these changes.
Step 3 – Current Period Activity
In this step, the reconciler agrees each revenue,
expenditure, and encumbrance transaction in the
statement to supporting documentation. He/she then
agrees each transaction in the support documentation to
the accounting statement. Through this process, the
reconciler:
1. Finds items in the statement which do not have a
match in the support documentation
2. Finds items in the support documentation which do
not have a match in the statement
3. Finds matching items which do not agree in dollar
amount
Step 3- Current Period Activity
(continued)
Payroll reconciliation
Payroll entries are unique because each employee’s
transactions are not listed separately on the statement, and
because each transaction will not necessarily have its own
supporting documentation. The reconciler will need to use
the memorandum of employment (plus the timesheet for
wage employees) to verify the accuracy and completeness
of payroll transactions. Each employee’s payroll
transactions may be found on an HRS report mailed out by
Accounts Control each month.
Step 3 – Current Period Activity
(continued)
Proper Approval
In addition to checking for accuracy and completeness of
transactions, the reconciler must make certain that each
transaction has proper approval. Approval may be given
by the department’s account manager, or another employee
who has been given delegated signature authority by the
manager.
Step 4 – Reconciling Items
Reconciling items are situations in which the two
sets of information (the statement and the supporting
documentation) do not perfectly match. There are
several different reasons why transactions would not
match.
Missing support documentation
The reconciler may occasionally be without a copy of
the support documentation for an item listed in the
statement. In this situation, he/she should contact the
appropriate office and request a copy of the document.
Step 4 – Reconciling Items
(continued)
Timing differences
These are items that have not posted to the statement yet. An
example would be a purchase order that the department has
issued , but that has not been posted. During the
reconciliation process, the reconciler will need to make
certain that all timing differences from previous months have
posted. He/she will also need to make a note of the current
month’s timing differences for future reference.
Step 4 – Reconciling Items
(continued)
Proposed corrections
The reconciler will occasionally need to propose
corrections to the accounting system. He/she should
have proposed corrections approved by the account
manager before contacting the appropriate
department.
The reconciler should make certain that all proposed
corrections from previous months have posted.
He/she should make a note of the current month’s
proposed corrections for future reference.
Step 5 – Reconciliation Report
The reconciler should provide a reconciliation report to the
department’s account manager after the reconciliation has
been completed. The reconciliation report should be signed
and dated by the reconciler, approved and signed by the
account manager, and filed within the department along with
other materials used in the reconciliation process.
Resources
If you have any questions related to account reconciliation,
information on monthly reconciliation training sessions, or
distribution of account statements, please visit our web site
at http://comptroller.panam.edu/acct_cont.html
Account
Reconciliation
Training Quiz
Question #1
Which of the following are important goals of an account
reconciliation?
To check for accuracy in dollar amount
To check for completeness of transactions in both the
statement and the supporting documentation
To make certain that each transaction has proper
approval
All of the above
Review
Question #2
When should account reconciliations be prepared?
After the end of each quarter
At the end of the fiscal year
Prior to an audit
After the monthly statement of account is received
Review
Question #3
Which type of support documentation would be used to
support an encumbrance transaction?
Invoice
Deposit receipt
Purchase order
Travel voucher
Review
Question #4
The February Open Commitments Status portion of the
statement would provide information on all encumbrances
that have posted to the account during the fiscal year.
True
False
Review
Question #5
In a department with five employees, each employee’s
payroll transactions appear separately on the statement
of account.
True
False
Review
Question #6
The reconciliation report will not provide the following
information to the account manager.
Reconciling items
A summary of the reconciliation process
Individual expenditures
The available balance of the account
Review
Question #7
The reconciler should go to the account manager with
any proposed corrections before contacting the
appropriate department.
True
False
Review
Question #8
The reconciliation report is similar in format to which
section of the statement of account.
Account Summary
Open Commitments Status
Report of Transactions
Review
Congratulations!!
You have successfully completed Account
Reconciliation Training through The University
of Texas – Pan American.