Bank Reconciliation
Also called: bank rec, bank reco
What is Bank Reconciliation?
Bank reconciliation compares the cash book against the bank statement for a period and explains every difference — uncleared cheques, bank charges, direct credits and posting errors.
Why Bank Reconciliation matters
Reconciliation is the strongest routine control a small business has. Unrecorded charges, duplicate payments and missing deposits surface here and almost nowhere else.
Bank Reconciliation formula
Adjusted bank balance = Statement balance + Deposits in transit − Outstanding cheques
This should equal the corrected cash book balance.
How Bank Reconciliation works in practice
Reconcile monthly, or weekly if transaction volume is high. Start from the bank balance, add deposits not yet credited, subtract cheques not yet presented, and account for everything that remains.
Frequently asked questions
Monthly at minimum. Businesses with many daily settlements benefit from weekly.