How to Reconcile a Bank Account in Bookkeeping
To reconcile a bank account, match your accounting records to your bank statement, line by line, until the two agree or every difference is explained. You compare the statement's ending balance with your books, find timing differences and errors, and correct the books. It is good practice to do it at least monthly for every bank and card account.
What is bank reconciliation?
Your books and your bank rarely agree on a given day. You write a check on the 28th, but the bank clears it on the 3rd. A customer pays on the 30th, and the deposit posts on the 1st. Banks add fees and interest that you may not have recorded yet.
Reconciliation is the check that finds and explains those differences. At the end, the adjusted bank balance and the adjusted book balance match. If they do not, something is missing, duplicated or wrong.
Is bank reconciliation necessary?
Yes, for any account that matters. Without it you cannot tell whether:
- A transaction was recorded twice or not at all
- A payment was entered at the wrong amount
- A fee or charge went unnoticed
- Someone made a payment you did not approve
- The cash balance on your reports is real
Reports built on unreconciled books may look reasonable and still be wrong. English Oak includes bank and credit-card reconciliation in its bookkeeping service, as part of a monthly reporting cycle. For the wider duties see what a bookkeeper does.
How do you reconcile a bank account, step by step?
- Get the statement. Use the bank or card statement for the period you are closing.
- Confirm the starting point. The opening balance in your reconciliation must equal the closing balance of the last reconciliation. If it does not, an earlier entry was changed or the last reconciliation was wrong.
- Tick off matching items. Go through the statement and the books and mark each transaction that appears in both.
- List what is left in the books only. Typical items: checks not yet cashed, deposits in transit.
- List what is left on the statement only. Typical items: bank fees, interest, direct debits, a deposit you forgot to record.
- Record the missing items in your books. Add fees, interest and anything else the bank shows that you did not.
- Calculate the adjusted balances. Statement balance, plus deposits in transit, minus outstanding checks, should equal the adjusted book balance.
- Investigate any difference. Look for transposed digits, duplicates, wrong amounts or missing entries.
- Sign and file. Save the finished reconciliation with the statement.
Accounting software such as QuickBooks or Xero can help match transactions and mark cleared items. It still cannot tell you why a difference exists. See does QuickBooks replace a bookkeeper.
What is a bank reconciliation example?
Illustrative example with invented numbers.
| Item | Amount |
|---|---|
| Bank statement ending balance | 12,400 |
| Add: deposit in transit (recorded in books on the 30th, posted by bank on the 2nd) | 1,800 |
| Less: outstanding check number 1042 (written on the 29th, not yet cleared) | 650 |
| Adjusted bank balance | 13,550 |
| Book balance before adjustments | 13,565 |
| Less: monthly bank fee not yet recorded | 15 |
| Adjusted book balance | 13,550 |
| Difference | 0 |
The two adjusted balances agree, so this account is reconciled. Had the book balance been 13,590 instead, the adjusted books would show 13,575, a 25 difference, and the work would not be finished until that was explained.
The point is the last line. A reconciliation that does not agree is not done, and the leftover amount is the clue. A common rule of thumb is that a difference divisible by nine can point to a transposed digit. It is a clue, not proof. A difference equal to a transaction amount often means a missing or duplicated entry.
Is there a bank reconciliation template?
Here is a plain template you can copy into a spreadsheet or a document. It is a layout, not a download.
| Line | Description | Amount |
|---|---|---|
| 1 | Ending balance per bank statement | |
| 2 | Add: deposits in transit | |
| 3 | Less: outstanding checks and payments | |
| 4 | Adjusted bank balance (line 1 plus line 2 minus line 3) | |
| 5 | Balance per books | |
| 6 | Add: interest or deposits not yet recorded | |
| 7 | Less: fees and charges not yet recorded | |
| 8 | Less or add: corrections for errors | |
| 9 | Adjusted book balance | |
| 10 | Difference (line 4 minus line 9), should be zero |
If you use Excel or Google Sheets, put the formulas in lines 4, 9 and 10. Keep a copy per account per month, with the statement attached.
How often should you reconcile?
Reconcile at least monthly, for every bank account, credit card, loan and payment processor; busier businesses may do it weekly. English Oak works on a monthly cycle. The longer you wait, the harder it is to find the cause of a difference, because you are hunting through more transactions.
What goes wrong in reconciliation?
- Skipping it. Months of unreconciled activity pile up. See catch-up bookkeeping.
- Forcing the balance. Booking the difference to a plug account hides the problem.
- Editing old periods. Changing closed transactions breaks the opening balance.
- Mixing personal and business spending. It confuses the match.
- Ignoring card and processor accounts. They need reconciling too.
- One person doing everything. Entering, paying and reconciling with no review is a control gap.
How does reconciliation connect to payables and receivables?
Payments you make and receipts you collect are the main items you tick off. If the payables ledger says a bill was paid but the bank never shows it, the reconciliation will expose that. See accounts payable and receivable explained. If you are choosing how to record income and expenses, cash vs accrual accounting explains the difference.
Can you do it yourself?
Yes. With good software and a routine, a simple account takes little time. It becomes a burden when there are many accounts, many transactions or a backlog. See what we do. English Oak does not prepare tax returns, audit or give investment advice.
What English Oak Financial charges
English Oak Financial starts bookkeeping from $500 a month. Pricing is custom to your business and charged as one fixed monthly fee that includes all the work required. See pricing.
Need this done for you? See our Bookkeeping service, or pricing. English Oak Financial does not prepare tax returns, perform audits or give investment advice. This guide is general information, not tax, legal or investment advice.
Related pages
Common questions
What is bank reconciliation?
It is the process of matching your accounting records to your bank statement and explaining every difference, so the books show the real cash position.
What is a bank reconciliation example?
Statement balance, plus deposits in transit, minus outstanding checks, should equal the adjusted book balance after you record any fees or interest. If the two sides differ, you investigate until the difference is explained.
Is bank reconciliation necessary?
Yes. It is a key check on whether your books are complete and accurate, and it helps expose errors and unauthorized payments.
How often should I reconcile my bank account?
At least monthly for every account. Busier businesses may do it weekly.
Can I use a spreadsheet for bank reconciliation?
Yes. The table above works in Excel or Google Sheets. Accounting software can help with the matching, but you still need to review the result.
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