How to Reconcile Fixed Asset Depreciation to the General Ledger

Reconciling the depreciation schedule to the general ledger is one of those close tasks that catches real errors. Additions posted to the wrong account, disposals never relieved, a journal entry that bypassed the subledger: all of it shows up here. The procedure is simple. You are proving that the fixed asset register and the ledger tell the same story, month by month and year to date.

What are you actually proving?

Two balances must agree. First, the cost of assets on the register, by asset account, must equal the balance of each fixed asset control account in the ledger. Second, accumulated depreciation on the register must equal the accumulated depreciation account, or the credit side of a single asset account if you run assets net.

Most register reports support this by grouping assets by their ledger account number and subtotaling each group. That grouping only works if every asset carries an account assignment. Before you run the report, confirm none are blank or defaulted to a suspense account.

How do you structure the reconciliation?

Build it as a roll-forward, in columns, for each asset account:

• Opening accumulated depreciation, at the start of the period
• Add depreciation charge for the period
• Less depreciation reversed or relieved on disposals
• Closing accumulated depreciation

Then compare the closing figure to the ledger account balance and note the difference, which should be zero.

Run the same roll-forward on cost: opening cost, additions, disposals, transfers, closing cost. Tie closing cost to the asset control account. A cost reconciliation that agrees while depreciation does not usually points to a manual journal entry posted straight to accumulated depreciation.

A worked example

Suppose the register shows, for the equipment account, opening accumulated depreciation of 48,000, current depreciation of 2,000, and one disposal whose accumulated depreciation of 6,500 was relieved. Closing accumulated depreciation is 43,500.

The ledger shows 44,200. The difference of 700 is exactly one month of depreciation on the disposed asset. Someone posted the monthly depreciation journal before the disposal was processed, and the relief entry only removed 6,500 of a 7,200 balance. Correcting the disposal entry, not the depreciation journal, fixes both sides.

That is the pattern to look for: differences that equal whole months of depreciation on a single asset. They almost always trace to timing between the depreciation posting and the disposal.

Which judgement calls come up?

Partially depreciated disposals need care. If an asset is sold mid-year, decide whether the register relieves all accumulated depreciation to date, including the current year charge, or only to the last processed run. Pick the policy that matches how the depreciation journal was posted, and apply it consistently.

Impairments, revaluations, and write-downs belong in the reconciliation too, as separate columns if they occur. Do not bury them in depreciation, because the ledger account for impairment is usually distinct.

Where the register and the ledger disagree, the ledger is not automatically right. A journal entry posted directly to the control account, bypassing the register, is the more common cause. Investigate before adjusting either side, and document the correcting entry in the working papers.

When should you do it?

At minimum, reconcile at each year end before the depreciation figures feed the financial statements. Many practices do it monthly or quarterly, because a small difference caught early is a five-minute fix. Caught at year end, after twelve months of postings, it can take an afternoon.