Quick Answer
A reconciliation compares a firm's books with related cash, securities, or account records to find and resolve differences. Complete, current records support the firm's assets, liabilities, customer activity, and securities positions. Daily blotters, general ledgers, and customer and firm account ledgers provide the underlying transaction detail.
Reliable records create the starting point for a reliable reconciliation: compare the records, identify a difference, and address it through the firm's books-and-records process.
Reconciliation and Securities Differences
- Reconciliation: A comparison of the firm's books and records with related cash, securities, or account records to identify and resolve differences.
- Securities difference: A long or short securities difference found through examination, count, verification, or comparison. The firm must record the difference.
- Complete and current records: Records must accurately support the firm's assets, liabilities, customer activity, and securities positions.
Record flow: records and physical or external evidence -> comparison -> identified difference -> recorded and resolved difference.
Think of it this way: A reconciliation is a matching exercise, not a glance at two totals. If the securities count says 1,000 shares and the firm's position record says 1,020, the 20-share difference is the item that needs a record and follow-up.
Exam Tip: Gotchas
- A reconciliation is not satisfied merely because aggregate totals appear close. A securities difference found during a count, verification, examination, or comparison must be recorded and addressed.
Core Books and Records
- Blotter, or record of original entry: An itemized daily record of securities purchases and sales, receipts and deliveries of securities, cash receipts and disbursements, and other debits and credits.
- General ledger: A record of assets and liabilities, income and expense, and capital accounts.
- Customer and firm account ledgers: Records that itemize purchases, sales, receipts, deliveries, debits, and credits for each cash or margin account.
| Record | Primary use | Detail captured |
|---|---|---|
| Blotter | Daily original transaction entry | Trades, securities movements, cash movements, debits, and credits |
| General ledger | Firmwide financial position | Assets, liabilities, income, expense, and capital accounts |
| Account ledger | Activity by account | Purchases, sales, receipts, deliveries, debits, and credits in each cash or margin account |
Exam Tip: Gotchas
- The blotter and an account ledger both capture transaction activity, but the blotter is the daily original-entry record. The account ledger organizes activity for each specific cash or margin account.