Bank Reconciliation
Short answer
A bank reconciliation is the process of comparing the transactions in your bookkeeping records with the activity shown on a bank statement. The goal is to identify missing, duplicated, or incorrect entries and confirm that the recorded balance is supported by the bank activity.
Why it matters
Reconciliations are the single best way to confirm your books are accurate. Without them, a recorded balance is just a number someone entered — it may not reflect what the bank actually shows. Lenders, tax professionals, and owners all rely on reconciled accounts.
How it works
Each bank and credit-card account is matched against its statement, usually monthly. Starting balances are compared, deposits and payments are cleared against the statement, and any difference is tracked to a specific transaction. When the bookkeeping balance and the bank balance agree (after accounting for deposits in transit and outstanding checks), the account is reconciled.
A simple example
A business records $4,200 in deposits for the month, but the bank statement shows $4,050. During reconciliation, a $150 deposit is found in the books but not yet on the statement — it was deposited on the last day of the month. The $150 deposit in transit explains the difference, and the account reconciles cleanly.
A common misunderstanding
A common mistake is assuming that if the bank balance and the bookkeeping balance match, no reconciliation is needed. They can match by coincidence while errors are still hidden. Reconciliation is the process that proves the match is correct.
Related service
Monthly Bookkeeping
When you may want help
If reconciliations have not been completed for several months or the balances in QuickBooks no longer make sense, cleanup or catch-up work may be needed before a regular monthly process can begin.
Written and reviewed by Rachel Armstrong, owner and bookkeeper at Armstrong Quality Financial Services. QuickBooks Online Level 1 ProAdvisor. This entry explains a general concept and is not individualized tax, legal, or investment advice.
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