Accounting technology / Glossary / Bank reconciliation

What is a bank reconciliation?

Definition

A bank reconciliation is the check that the cash balance in a company's general ledger agrees with its bank statement. Each bank transaction is matched to an entry in the ledger, and any difference is explained, as a timing item such as an uncleared payment, or corrected, as with a missing bank fee or a posting error.

Also calledbank reccash reconciliation

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Compares: Ledger cash and bank statement
Timing items: Uncleared payments and deposits
Category: Financial close

How a bank reconciliation works

Start with the balance on the bank statement at the reconciliation date. Add deposits recorded in the ledger that the bank has not yet credited, deduct payments issued but not yet cleared, and the result should equal the ledger's cash balance. Anything left over is an error or an unrecorded item: bank charges, interest, direct debits, duplicated entries, payments posted to the wrong account. Those are posted or corrected, and the reconciliation is reviewed and signed off. Small businesses reconcile in their ledger from a bank feed: Xero and QuickBooks suggest a match for each bank line. Larger companies with many accounts and entities use matching rules in close software such as BlackLine, FloQast or Stacks AI, or treasury tools such as Embat, and reconcile daily rather than at month-end.

Common questions

How often should a bank reconciliation be done?+

At least monthly as part of the close, and daily or weekly for busy accounts. With bank feeds, most matching happens as transactions arrive, leaving the month-end reconciliation as a review.

What are reconciling items?+

Differences between the bank and the ledger that are explained rather than errors: payments issued but not yet cleared, deposits recorded but not yet credited, and items the bank has processed that are yet to be posted.

What is the difference between a bank reconciliation and account reconciliation?+

A bank reconciliation is one kind of account reconciliation, for cash accounts against bank statements. Account reconciliation covers every balance sheet account, each against its own supporting record.