General ledger account reconciliation

Last reviewed 2026-09-18

General ledger account reconciliation covers two jobs that are often given the same name: tying a control account to its subledger, and substantiating a ledger balance against something outside the accounting system. Only the second is evidence.

Control accounts and the subledger tie

A control account — receivables, payables, fixed assets, inventory — carries the total of a subledger. In SAP this is the account type literally called a reconciliation account: postings reach it only through the subledger, and direct entry is blocked by design.

The tie between control and subledger should be exact and automatic. When it is not, the cause is one of a short list, and the list is worth knowing because the symptoms look identical:

• A manual journal posted directly to the control account, bypassing the subledger. In a properly configured system this is impossible, which is why it is worth testing whether it is actually impossible in yours.
• An interface that posted a summary and dropped detail, or ran twice.
• A period-end timing difference where the subledger closed at a different moment.
• A foreign currency subledger revalued on a different basis from the control.

A control-to-subledger difference is an integrity failure, not a reconciling item. It does not get explained on the reconciliation; it gets fixed, because until it is fixed every downstream figure is built on two versions of the same balance.

Why the subledger tie is not independent evidence

The subledger feeds the control account. Agreeing them proves the interface worked. It proves nothing about whether the underlying balances are real, because both sides originate in the same system and share any error made upstream of it.

Independent substantiation of a receivables control means something from outside: what customers confirm they owe, cash actually received after the period end, credit notes raised subsequently. For payables it means supplier statements and a search for unrecorded liabilities. The subledger tie is a prerequisite for that work, not a substitute for it.

Intercompany reconciliation

Intercompany balances are the general ledger reconciliation that most reliably goes wrong, for a structural reason: both sides are inside the group, so nobody outside is going to complain, and the difference surfaces only at consolidation — as an elimination that does not eliminate.

The recurring causes:

• Timing. One entity books the charge in September, the other in October.
• Currency. Each side translated at a different rate, or on a different date, or one at closing and one at average. The balances agree in their own currency and differ in the group's.
• Disputed charges. One side recognised a recharge the other has not accepted. This is the only one that is a business disagreement rather than a mechanical error, and it is the one most often written off as a mechanical error.
• Netting. One side reports a net position and the other reports gross. Compare gross to gross, both ways, or an offsetting pair of errors disappears.

A group that clears intercompany differences to a plug account is not reconciling; it is recording the size of a problem in a place designed not to be looked at. The plug should be an aged, owned balance with a reason per line, and if it cannot be, that is the finding.

A practical order for the ledger close

1. Prove every control account ties to its subledger. Nothing else is meaningful until it does.
2. Clear every suspense and clearing account to zero, or explain the residual by transaction.
3. Agree intercompany, in both entity currencies, gross both ways, before translation.
4. Substantiate the remaining balances against evidence from outside the accounting system.
5. Age everything still open, with an owner against each item.

Common questions

What is general ledger account reconciliation?

It is the substantiation of general ledger balances — both tying control accounts to their subledgers, and evidencing the resulting balances against records from outside the accounting system.

Why can a control account not be posted to directly?

Because a direct posting makes the control disagree with the subledger it is meant to summarise, and there is then no authoritative version of the balance. Systems block it for that reason; where it is possible, it is worth testing whether it happens.

How should intercompany differences be cleared?

By agreeing them at source between the two entities, in both entity currencies, before translation, and gross in both directions. Clearing them centrally to a plug at consolidation records the size of the difference without addressing which side is wrong.

About Valcenra

Valcenra decomposes a financial movement into drivers that tie to the underlying records, keeps rounding, unmatched and unexplained residuals apart rather than summing them, and refuses to state a conclusion it cannot support — naming the field it needs and the conclusion that field decides. It is read-only: it drafts and computes, and it does not post journals, move money or approve anything. Talk to us.