Close & Reconciliation
Bank Reconciliation
Matching your book cash balance to the bank statement and explaining every difference between them.
A bank reconciliation proves that the cash your balance sheet reports equals the cash the bank says you have, and itemizes why the two numbers differ: deposits in transit, outstanding checks, bank fees you haven't recorded, and any errors on either side. You start with the statement balance, adjust it for items the bank doesn't know about yet, adjust your book balance for items you haven't recorded yet, and both adjusted totals must land on the same number.
It is the first control step of every month-end close. Cash is the most liquid — and most misstated — account, and the bank statement is the one source of truth outside your own books. A reconciliation that doesn't balance is either a timing item you haven't identified or a real problem: a missing transaction, a duplicated entry, a transposed amount, or fraud.
Example
Your book balance on June 30 is $42,800. The bank statement shows $45,150. Reconciling items: a $3,000 deposit made June 30 hasn't cleared, one check for $650 is still outstanding, and the bank charged $20 in fees you never recorded. Adjust the book balance up by $2,300 ($3,000 − $650 − $20) and both sides equal $45,150.
Common questions
How often should bank accounts be reconciled?
Monthly at minimum, and weekly or daily for high-volume accounts. Reconciling is dramatically easier close to the transaction date — matching 30 recent transactions takes minutes; matching 900 accumulated ones is a project.
What are common bank reconciliation errors?
Deposits recorded twice, checks recorded at the wrong amount, bank fees never entered, uncleared checks assumed to be cashed forever, and transactions assigned to the wrong account. This is exactly why the reconciliation happens first in close — it catches these before they flow into financials.
Practice this in the game
Accrual World turns concepts like these into playable drills. Pick the account, pick debit or credit, and get instant feedback. Free, no signup.
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