Bank Reconciliation
Definition
Bank reconciliation is the process of comparing the bank statement to the books and explaining why the two balances differ. The goal is to confirm that the difference is made up of legitimate items like outstanding checks and deposits in transit.
Example
The bank statement shows $10,000. The books show $10,200. The bookkeeper finds a $150 outstanding check and a $50 bank fee not yet recorded. After adjusting, both balances agree at $10,050.
Why It Matters
Reconciliation proves the books match reality. It catches missing transactions, duplicate entries, and bank errors before they cause bigger problems.