[GNC] The "purpose of reconciliation" [was: Re: Reconciling PayPal]

[Adrien Monteleone]

Ooh! A Can-o-Worms to munch on! (I promise to only nibble)

On 12/14/22 4:49 PM, Jim DeLaHunt wrote:
> On 2022-12-14 02:58, Dr. David Kirkby wrote:
> 
>> My understanding is that the purpose of the reconciliation is to 
>> enable one
>> to compare that the balances of two sets of accounts are in agreement....
> 
> Interesting. I have slightly different purpose when I do reconciliation: 
> to compare the _transactions_ of the two sets of accounts, and confirm 
> they are in agreement.

Funny thing about 'interesting' 'understandings'...there are always 
other perspectives...

Mine is that the purpose of reconciliation is to verify: that the 
starting balance, mathematically results in the ending balance, (both of 
which are 'as reported' by the 'other' entity, usually a bank of some 
sort) as a consequence of the listed transactions, which hopefully, by 
the reconciliation process, you verify are real and constitute 
legitimate activity affecting your account with said entity.

In such a pristine world, the Starting Balance is always the last Ending 
Balance, and since there is no pristine world, the new Ending Balance 
will never match your own, but if you are lucky, you can obtain it by 
math via the listed transactions from the bank/entity. This makes the 
new Ending Balance, (remember, this will become a new Starting Balance 
next period) otherwise pointless and useless, and is nothing to fret 
over, nor should it be allowed to raise your blood pressure or cause you 
stress. It is merely the result of a math problem where no sane rules 
determine the operands.

The one exception: at the moment
> the account is created, both my records and the bank's account agree 
> that the balance is zero.

I will be obnoxious here: perhaps the agreed initial balance is instead 
$50, £50, €50, et cetera depending on the opening deposit that creates 
the account as I highly doubt anyone would contractually consider an 
account 'created' if it had zero balance. (a technical legal thing, I 
know, but recall, I'm being obnoxious, and doing so with fair warning.)

I do agree, however sadly the fact is, that this initial balance is 
likely the only time you and the bank/entity will ever agree on any 
balance on any particular day. (and even that is not guaranteed!)

> Most of the time, the only date on which I care about what the bank says 
> my balance is, is the statement ending date. And I don't care what my 
> own book's balance for that account is on that date. I just care that 
> each transaction the bank says occurred during that statement period 
> matches exactly one transaction in my own books.

Yeah, what I just noted above: the 'purpose' of reconciliation is to 
verify: that 'A' + 'a bunch of specific stuff' = 'B', as long as you 
have *at least* the exact same list of 'a bunch of specific stuff'. The 
fact that either you or the bank has any knowledge of 'other specific 
stuff' is entirely irrelevant to reconciliation. (at least for this period!)

And I hope none of that is too pedantic for anyone's taste. I'm just 
offering another perspective. (the obnoxious part above was just for 
fun, by the way)

Regards,
Adrien