Accounting, Payroll & Pension Issues/Why must statements balance to the penny?
Dear Mr. Naman:
I have worked in office jobs where I was required to do basic accounting including reconciling statements. I was told that I must balance to the penny but no one ever explained why. I thought that it would not matter if it was off by a few cents or even rounded off if it was off by less than $1.00. I got yelled at and even fired from one job for not balancing statements. Would you please explain precisely why it is necessary to balance to the penny and what happens if numbers are rounded? Does it affect the business that much? Please forgive me if I am not using the correct terminology. Thank you.
Reconciliations should always be "to the penny." If not, the problem is that there is the possibility that several errors can occur which taken together result in an error of several cents. By reconciliating to the penny, a reviewer of your work, or your supervisor, is assured that you have taken the time to find and correct mistakes or other problems. This is particularly important when reconciliation a cash or checking account.
The implication is that by not reconciling to the penny, you do not care about the accuracy of your work, or that you are sloppy in your work habits. So, by reconciling to the penny you are telling your supervisor that you have done a good job, that your work is accurate.
Knowing when to round, or when to not reconcile to the penny, occurs after years of experience about the business in question. After all the work is done in preparing financial statements, a reviewer may round numbers. However, that decision must be based on assurances from the people at a lower level that their work has been done accurately.
If what I have written is not clear or if you have additonal questions, please ask follow-up questions of me or other experts on this forum. I would also encourage you to take college or other courses on bookkeeping. There should be community colleges or online courses to help you. I want to help you NOT get fired from any future jobs.