Reconciliation, Allocations & FX Adjustments

Month-end: Making the numbers match

Bank account reconciliation

Bank reconciliation is the process of matching your Business Central bank ledger entries against the actual bank statement. The goal is to confirm that every transaction BC knows about also appears on the bank statement, and vice versa.

The reconciliation process

Olivia reconciles the operating account at the end of each month:

1. Open Bank Account Reconciliations (Tell Me > “Bank Account Reconciliation”)
2. Select the bank account, enter the Statement Date and the Statement Ending Balance from the bank statement
3. Import the bank statement file (CAMT, CSV) or enter lines manually
4. Suggest Lines Matching — BC auto-matches by amount, date, and description
5. Match Manually — pair remaining lines by selecting a statement line and one or more BC entries
6. Transfer Difference to GL Account — for bank fees or interest not yet recorded in BC, post directly from the reconciliation
7. Review outstanding items — cheques not yet cleared, deposits in transit. These are normal and will match next period.
8. When the Difference is zero, click Post to finalise

Question

What does it mean when the bank reconciliation 'Difference' is zero?

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Answer

The statement ending balance equals the BC balance after accounting for matched entries and outstanding items. This means everything is explained — either matched or identified as outstanding. You can now post the reconciliation.

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💡 Exam tip: Outstanding items are normal

The exam may present a scenario where cheques written in the last few days have not cleared the bank. This does NOT mean the reconciliation is wrong. Outstanding cheques and deposits in transit are expected — they simply have not reached the bank by the statement date. They should appear on next month’s statement.

Payment reconciliation journal vs bank account reconciliation

These two features sound similar but do very different things.

Payment Reconciliation Journal vs Bank Account Reconciliation

Feature	Payment Recon Journal	Bank Account Reconciliation
Purpose	Create and post payments from bank data	Match existing BC entries against the bank statement
Creates entries?	Yes — posts customer/vendor ledger entries	No — only matches what already exists
When to use	Processing incoming payments from the bank	Verifying BC and the bank agree at month-end
Matching	Matches bank lines to open customer/vendor entries	Matches bank lines to existing bank ledger entries
After posting	New payment entries created and applied	Existing entries marked as reconciled

Think of it this way: Payment Reconciliation Journal = incoming work (turning bank data into BC entries). Bank Account Reconciliation = checking work (confirming BC and the bank agree).

Question

What is the key difference between the Payment Reconciliation Journal and Bank Account Reconciliation?

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Answer

The Payment Reconciliation Journal CREATES new entries (posts payments/receipts from bank data). Bank Account Reconciliation only MATCHES existing BC entries to the bank statement without creating new transactions.

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Knowledge Check

Olivia imports a bank statement into BC and notices several customer payments that were deposited but never recorded. Which feature should she use?

ABank Account Reconciliation — it will match and post the deposits automaticallyBPayment Reconciliation Journal — it can create and post customer payment entries from the bank dataCGeneral Journal — she must manually create entries for each depositDCash Receipt Journal — she must manually apply each payment

Check Answer

Recurring journals — operational context

We covered recurring journal setup in Domain 2. Here, we focus on how they fit into month-end operations.

Olivia has these recurring journals posting each month:

Recurring Entry	Method	Why
Office rent ($4,500)	Fixed	Same amount, split across departments
Depreciation	Variable	Changes as assets are added or disposed
Insurance accrual ($1,000)	Fixed	Annual policy spread over 12 months
Reversing accruals	Reversing Variable	Estimated expenses that auto-reverse next period

Recurring methods quick reference

Method	Behaviour
Fixed	Same amount every period
Variable	You update the amount before each posting
Balance	Posts whatever is needed to reach a target balance
Reversing Fixed	Posts a fixed amount, then auto-reverses on the next posting date
Reversing Variable	Posts a variable amount, then auto-reverses
Reversing Balance	Posts to reach a target balance, then auto-reverses

💡 Why reversing journals matter

Olivia estimates $3,200 electricity for March, but the invoice will not arrive until April. She posts a Reversing Variable entry on March 31. On April 1, it auto-reverses. When the real invoice arrives at $3,150, she posts it normally — both months are clean. The exam loves reversing scenarios: the reversal happens on the NEXT posting date automatically.

Question

What is the difference between Fixed and Reversing Fixed recurring methods?

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Answer

Fixed posts the same amount each period and stays. Reversing Fixed posts the same amount AND automatically creates a reversal entry on the next recurring date. Use Reversing Fixed for accruals that will be replaced by actual invoices.

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GL allocations

Some costs benefit multiple departments but arrive as a single invoice. GL allocations let you distribute those costs across dimensions automatically.

How allocations work

Olivia pays $4,500 in rent each month. The office space is shared:

• Sales department uses 40% of the floor space
• Operations uses 30%
• Administration uses 30%

Instead of manually splitting every rent entry, she sets up an allocation account that distributes the cost automatically.

Setting up allocation accounts

1. Open GL Allocation Accounts (Tell Me > “GL Allocation Account”)
2. Create an account (e.g., ALLOC-RENT — “Rent Allocation”)
3. Define the distribution — where the cost goes:

Share	Account	Department	Percentage
1	6100 (Rent Expense)	SALES	40%
2	6100 (Rent Expense)	OPERATIONS	30%
3	6100 (Rent Expense)	ADMIN	30%

Fixed percentage allocation means you define the split manually (40/30/30). Variable percentage recalculates the split from actual data like headcount or revenue per department.

Running allocations

Olivia posts the full rent to a holding account, then runs the allocation:

1. Post $4,500 to account 6099 (Rent — Unallocated)
2. Run the allocation — BC creates entries that debit 6100 per department (SALES $1,800, OPERATIONS $1,350, ADMIN $1,350) and credit 6099 for $4,500
3. The holding account zeros out and each department carries its fair share

💡 Exam tip: Allocation accounts

BC has two allocation mechanisms: GL Allocation Accounts (distribute from one GL account to multiple accounts/dimensions) and Allocation keys on journal lines (split a journal line across dimensions during posting). The exam typically tests GL Allocation Accounts. Allocation happens AFTER the initial posting — the source entry must exist first.

Knowledge Check

Coastal Traders pays a $6,000 monthly IT support bill. The cost should be split based on headcount: Sales has 20 employees, Operations has 15, and Admin has 10. What type of allocation should Olivia use?

AFixed percentage — 33/33/34 split across the three departmentsBVariable percentage — based on headcount per departmentCDeferral template — spread the cost over 12 monthsDRecurring journal — post separate amounts to each department

Check Answer

Adjust currency exchange rates

Coastal Traders is an import/export business — they buy in USD and EUR but report in NZD. When exchange rates move between recording and paying an invoice, the NZD value of open entries changes.

Why exchange rate adjustments matter

Marcus entered a USD $10,000 purchase invoice on March 5 when the rate was 1 USD = 1.62 NZD. BC recorded it as NZ$16,200.

By March 31 (month-end), the rate has moved to 1 USD = 1.67 NZD. The same invoice is now worth NZ$16,700 in today’s money. That is a NZ$500 difference — and since Coastal Traders has not paid it yet, their liability is understated.

The Adjust Exchange Rates batch job fixes this by revaluing all open foreign currency entries to the current rate.

What gets adjusted

The batch job revalues open vendor entries (unpaid purchase invoices), open customer entries (unpaid sales invoices), foreign currency bank account balances, and GL accounts if you use an Additional Reporting Currency.

Running the adjustment

1. Open Adjust Exchange Rates (Tell Me > “Adjust Exchange Rates”)
2. Set the period (Starting/Ending Date), Posting Date, and Document No. (e.g., FX-MAR2026)
3. Filter by currency if needed (USD, EUR, or blank for all)
4. Select which entry types to revalue (Customer, Vendor, Bank)
5. Click OK — BC calculates the difference between the original rate and current rate for every open entry and posts to unrealised gains/losses accounts

Unrealised vs realised — the lifecycle

Here is what happens to Marcus’s $10,000 invoice:

• March 5 (posted): USD $10,000 at 1.62 = NZ$16,200
• March 31 (adjustment): Rate now 1.67 = NZ$16,700. Unrealised loss of NZ$500 posted (liability increased)
• April 15 (paid): Rate is 1.64 = NZ$16,400. BC reverses the unrealised entry and posts a realised loss of NZ$200 (the actual difference between invoice rate and payment rate)

Question

When should you run the Adjust Exchange Rates batch job?

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Answer

At month-end (or period-end), BEFORE generating financial reports and closing the period. It revalues all open foreign currency entries to current exchange rates, posting unrealised gains or losses. Run it after updating the currency exchange rate table with current rates.

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⚠️ Update rates BEFORE adjusting

The batch job uses rates from the Currency Exchange Rate table. If you forget to update rates first, BC uses old rates and the adjustment is wrong. Always enter current rates (manually or via the automatic exchange rate service) BEFORE running the batch job.

Knowledge Check

Marcus runs the Adjust Exchange Rates batch job at March month-end. An open EUR customer invoice was posted at 1 EUR = 1.75 NZD. The March 31 rate is 1 EUR = 1.70 NZD. What adjustment is posted?

AAn unrealised FX loss — the customer owes less in NZD termsBAn unrealised FX gain — the receivable decreased, which is a gain for Coastal TradersCAn unrealised FX gain — the customer now owes more in NZD termsDNo adjustment — customer entries are not affected by exchange rate changes

Check Answer

Month-end checklist

Step	Task	Why This Order
1	Post recurring journals	Standard monthly entries into the ledger first
2	Run GL allocations	Distributes shared costs — needs recurring entries posted
3	Update exchange rates	Current rates needed before revaluation
4	Run Adjust Exchange Rates	Revalues open foreign currency entries
5	Reconcile bank accounts	Done last — earlier steps may create bank-affecting entries
6	Review and close	Trial balance, P and L review, close the period

💡 Why order matters

Bank reconciliation comes last because exchange rate adjustments on foreign currency bank accounts change the LCY balance. If you reconcile first, you would need to reconcile again. The exam may ask about correct sequence: post first, adjust second, reconcile last.

Question

In what order should month-end processes be run?

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Answer

1) Post recurring journals, 2) Run GL allocations, 3) Update exchange rates, 4) Run Adjust Exchange Rates, 5) Reconcile bank accounts, 6) Review and close. Reconciliation comes last because earlier steps may create entries that affect bank balances.

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Knowledge check

Knowledge Check

During bank reconciliation, Olivia finds a $45 bank fee on the statement that was never recorded in BC. What should she do?

AIgnore it — bank fees are not material enough to recordBCreate a manual journal entry for the fee, then re-import the bank statementCUse the Transfer Difference to GL Account function to post the fee directly from the reconciliationDDelete the bank statement line so the reconciliation balances

Check Answer

🎬 Video coming soon

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Next up: The final module — fixed asset transactions. You’ll learn how to acquire assets, depreciate them over time, and dispose of them when they’re no longer needed. The complete asset lifecycle with GL entries at every stage.