Three-Way Reconciliation Process

The three-way reconciliation process is a financial close procedure that compares the account balances in an organization’s accounting records to the corresponding balances in its bank statements and other financial documents. The purpose of this process is to ensure that all transactions have been properly recorded and that there are no discrepancies between the company’s books and its actual bank balance.

This reconciliation process is typically performed at the end of each month, but can also be done on a quarterly or annual basis. The reconciling items are typically categorized into three categories: cash, receivables, and payables. For each category, the reconciling items are then further classified into two types: those that should be recorded on the company’s books (i.e., ‘book’ items), and those that should not be recorded (i.e., ‘non-book’ items).

The first step in the three-way reconciliation process is to identify all of the reconciling items in each category. Once all of the reconciling items have been identified, they are then classified as either book or non-book items. Next, the book items are entered into the accounting records, and the non-book items are removed from the records. Finally, a trial balance is prepared to ensure that all of the book entries have been properly made and that there are no outstanding reconciling items.