Explainer
How to reconcile a bank account, step by step
A bookkeeper's procedure for reconciling a bank statement: the steps, the usual reasons the balances differ, and what to do when they still do not agree.
7 min read · Last reviewed · by the stmtai team
Bank reconciliation means taking the statement for a period and proving two things: every line on the statement is either already in your books or gets added now, and every line in your books has either cleared the bank or is still on its way. When you finish, the adjusted bank balance and the adjusted book balance are the same number. If they are not the same, you are not finished.
That is the whole task. The rest of this guide is the procedure I use, the things that usually cause a difference, and what to do when the difference will not go away.
How often to reconcile
At least monthly, as soon as the statement arrives. That is the floor given by state auditors' offices and by Xero and QuickBooks in their own guidance (checked September 2026), and it matches experience: a month-old transaction is still explainable, a six-month-old one is a research project. If the account carries a lot of card activity or you take cash, do it weekly.
Every account gets reconciled. That includes the credit card, the savings account you never touch and the PayPal balance. The quiet accounts are where errors sit undisturbed for years.
What you need
- The statement for the period, on paper or as a PDF. If you have only a PDF and want the rows in a spreadsheet to tick against, see converting a bank statement to Excel.
- Your books for the same period: the bank register in your accounting software, a cash book or a spreadsheet.
- Last month's reconciliation, with its list of outstanding items.
- Something to tick with. A pencil works. A "cleared" flag in the software works.
The procedure
1. Check the opening balance
The opening balance on this statement must equal the closing balance on the last one, and both must equal the reconciled book balance you ended with last month. If they do not, stop. Something was changed after last month's reconciliation was signed off: a deleted transaction, an edited amount, a back-dated entry. Find it first. You cannot reconcile this month on top of a broken last month.
2. Tick every matching line
Work through the statement one line at a time and find the same transaction in your books. Same amount, same direction, same date or near it. Mark both sides cleared. Do deposits first, then payments, then fees and interest. Working in one direction stops you skipping lines.
Match on amount, not description. Bank descriptions are truncated, in capitals and full of processor codes; the amount is the reliable key. If two lines on the statement have the same amount on the same day, match them one for one and make sure your books have two as well.
3. List what is left over
Once everything that can be matched is matched, you have two piles.
In your books but not on the statement:
- Cheques you wrote that the payee has not banked yet (outstanding cheques).
- Deposits you recorded that the bank posted after the cut-off (deposits in transit).
On the statement but not in your books:
- Bank charges and interest.
- Direct debits and card payments nobody recorded.
- Returned or bounced payments.
- Anything you do not recognise.
4. Record what the bank knew and you did not
Enter the bank charges, the interest, the forgotten direct debits and the bounced items into your books, dated as the bank dated them. These are real transactions; the bank just knew about them first.
Do not enter anything you cannot identify. An unrecognised debit gets investigated in step 6. It does not get booked to "miscellaneous".
5. Prove the two balances
Now build the proof. It is two short columns.
| Bank side | |
|---|---|
| Closing balance per statement | 10,500.00 |
| Add deposits in transit | 1,200.00 |
| Less outstanding cheques | (2,350.00) |
| Adjusted bank balance | 9,350.00 |
| Book side | |
|---|---|
| Closing balance per books, before step 4 | 9,425.00 |
| Add interest received | 15.00 |
| Less bank charges | (35.00) |
| Less returned cheque | (55.00) |
| Adjusted book balance | 9,350.00 |
The two adjusted figures agree, so the account is reconciled. If your software does the arithmetic for you, it is doing exactly this.
6. Chase the difference
If they do not agree, the size of the difference tells you where to look.
| The difference is | Likely cause |
|---|---|
| Exactly one transaction amount | That item was missed, or entered twice |
| Divisible by 9 | Transposed digits: 54 entered as 45 gives a difference of 9 |
| Exactly double one transaction | A payment entered as a receipt, or the reverse |
| Small and round | A fee not recorded, or a rounding correction |
| The same as last month's | Last month was forced; go back and fix it |
The double-amount case is the one people miss. If a 140.00 payment is sitting in your books as a 140.00 receipt, the balance is off by 280.00 and every line still exists, so ticking does not find it. Look for any amount that is exactly half the difference and check its sign.
The same thing happens when a PDF statement is converted into a spreadsheet rather than typed, if the converter puts a figure in the wrong column. stmtai re-adds every converted row against the printed opening and closing balances and flags the first row where the running total breaks, with a one-click swap when a debit and credit look reversed; there is a sample result showing what that looks like. However the rows got into your books, the arithmetic check is the same.
7. Write it down and keep it
A reconciliation you cannot show later is worth very little. For each account and each period, keep the statement, the proof from step 5, the list of outstanding items with their dates, any entries you made in step 4, and a note of who did it and when. Paper or PDF, but kept together.
Where the differences usually come from
After enough of these, the causes become boringly consistent.
- Bank charges. Small, monthly, and never in the books until reconciliation.
- Timing. A cheque written on the 30th and banked on the 2nd is not an error. It is an outstanding item and it will clear next month.
- Duplicates. The same supplier invoice paid and entered twice, or a bank feed that imported a week of transactions twice.
- Transpositions and dropped digits. 1,250.00 entered as 1,205.00, or as 125.00.
- Wrong account. The payment left the savings account but was recorded against the current account.
- Sign errors. A refund recorded as a payment.
- Things that are actually wrong. Card fraud, a supplier taking a direct debit after you cancelled it, a payroll run for someone who has left. Reconciliation is usually where these come to light.
Mistakes that make it harder than it needs to be
Forcing the balance. Posting a "reconciliation adjustment" so the two columns agree hides the error and carries it into next month. If you truly cannot find a small difference, park it in a suspense account labelled with the period and keep looking. Do not clear it to expenses.
Ignoring a small difference. A 5.00 gap is often two larger errors that nearly cancel. The size of the difference says nothing about the size of the mistakes behind it.
Letting outstanding cheques age. Anything uncleared after a month deserves a call to the payee. After three months, stop the cheque and reissue or void it. In some jurisdictions old uncashed cheques eventually have to be handed over as unclaimed property, so do not let them sit.
One person doing everything. If the person who pays the bills also reconciles the account, nobody is placed to notice a payment to themselves. Where the business is big enough, split those two jobs. Where it is not, have the owner open the bank statement first.
Reconciling only the current account. Credit cards and loans have statements too, and they go wrong in exactly the same ways.
When to hand it to someone
If the opening balance has not matched for several months, if the difference is large and you cannot explain it, or if you suspect someone is taking money, get a bookkeeper or accountant involved now rather than after year end. Untangling twelve months of forced reconciliations costs far more than a few hours of help in month two.
For the mechanics of getting statement rows into your software in the first place, see importing bank transactions into QuickBooks or importing bank statements into Xero.