What is the primary purpose of a reconciliation in accounting?

The primary purpose of a reconciliation in accounting is to compare two sets of records to ensure they agree and identify discrepancies. This process typically involves verifying the accuracy of the balances shown in financial statements against external records, such as bank statements or ledgers. By identifying and addressing any discrepancies, reconciliation helps maintain the integrity of financial data.

Accurate reconciliations are crucial because they help ensure that financial records are consistent and up-to-date, which is essential for preparing reliable financial reports. This verification process also assists in detecting errors or fraud, improving overall financial accountability. Reconciliation ultimately supports effective financial management by providing a clear and accurate picture of an organization’s financial standing.