What is the practical purpose of reconciling in GNUCash?

[Aaron Laws]

On Mon, Dec 12, 2016 at 9:26 AM, replicon <replicon at gmail.com> wrote:

> Hi all,
>
> This might seem like a silly question, but... Does reconciliation have any
> actual practical side-effects, like changes in how reports are generated,
> or
> anything like that?
>
> It seems to me like nothing but a feel-good blue line that makes it harder
> to refactor your CoA later (e.g. suppose you suddenly want to know how much
> you've been spending on coffee every day, so maybe you want to create a
> subaccount under expenses and move all "coffee break" transactions in
> there). Or just in general, if I want to move accounts around, or
> whatever...
>
> If I always look at the final balance for my bank accounts/loans when I
> record something, which means my tracking file is ALWAYS in a good state as
> of the last entry, is there any positive side-benefit of reconciling? Seems
> like it's just a confirmation of something everyone should just be doing
> anyway (having the correct balance in the end).
>
> So, I haven't been reconciling anything. Am I missing out on anything
> useful/important? :)
>

It sounds like you're not missing anything important...yet. The
reconciliation process shows its value most when there are a relatively
large amount of items to reconcile. I only reconcile when I get a
statement, so there may be 80 transactions in a month. If none of my
historical balances match the final balance from the statement (because a
transaction that hasn't hit the statement is before one that has), the only
reasonable way to proceed is the reconciliation process: match transactions
on the statement to those in the books and deal with extras in both places.
In fact, if there is such an ordering fiasco (cheques that don't get cashed
quickly constantly present this problem), it may be that *none* of my
historical balances match any daily balances on the statement! The only way
all the balances would match is if I recorded the transactions in the same
order they were carried out -- which means cheques were cashed in the same
order in which they were written.

Anyway, if you keep your accounts in line with what the bank says daily,
and you change the dates on your cheques to match the date they were
withdrawn (rather than the date you wrote the cheques), AND, you never get
behind(!!) then everything will be fine. This is effectively daily
hyper-reconciliation, and since the amount of transactions involved is
small, it's easy enough to do "by eye". I say "hyper" because you're making
sure your transactions are mirroring what the bank says with no date
discrepancies while with normal reconciliation, the dates may reflect some
processing or handling time.

If you get behind, though, don't call me about the ensuing fiasco ;-)