Balances are created by selecting and summarizing attributes of transactions that will be included in the balance. These attributes are termed the "Posting Key". We might use the transaction attributes themselves, or we might derive the balance attributes from them by joining to other tables or doing some other form of transformation.

What if the attributes on the balances need to change? For example, for most purposes a particular account might be classified as a “contra” account, like loan loss reserves, reducing the total asset value of the loans. It typically is a “negative” amount relative to the asset shown in the asset section of the balance sheet. However, being a negative amount, it could also be classified as a liability, which typically has a “negative” balance. Thus for some reports, finance might make journal entries to “move” an amount from one reporting category to another.

This is a simple form of reclassification. Reclassifications can happen for many other reasons; for example, rules which post transactions to balances might change; new balances might be needed which divide amounts stored in historical balances, or report regulations might demand a balance be associated with another portion of a report.

In this course, you will learn about the underlying principles of how reclassification processes can be handled in the financial system.