How to do a bank reconciliation

A bank reconciliation proves that your books match reality. It is the single most useful bookkeeping check, catching missing transactions, duplicates, bank errors and fraud. This guide shows how to do one, with a worked example.

By Muhammad Bilal, Chartered Accountant. Reviewed by Awais Jameel, Chartered Accountant. Checked against official sources on . 2 minute read.

Short answer

To do a bank reconciliation, compare your books with the bank statement for the same period. Start with the statement's ending balance, add deposits in transit, subtract outstanding payments, and check that the result equals your book balance. Investigate any remaining difference, correct errors, and do it every month.

At a glance

What it is
Matching your books to the bank statement
How often
Every month, for every account
Timing differences
Deposits in transit, outstanding payments
Errors it catches
Missing, duplicated or miscategorized transactions
Also catches
Bank errors and unauthorized payments
Done when
Adjusted bank balance equals book balance
How to do a bank reconciliationSteps: 1. Get the statement; 2. Match every transaction; 3. List timing differences; 4. Record missing items; 5. Compare adjusted balances; 6. Investigate and lock.THE PROCESS AT A GLANCEHow to do a bank reconciliation1Get thestatementThe bank statementfor the month, withits ending balance2Match everytransactionTick each statementline against yourbooks, and eachbook entry againstthe statement3List timingdifferencesDeposits recordedin your books butnot yet on thestatement, andpayments recordedbut not yet cleared4Record missingitemsBank fees, interestand transactionsthat were neverbooked5CompareadjustedbalancesThe adjusted bankbalance shouldequal your bookbalance6Investigateand lockResolve anydifference, thenmark the monthreconciled so itcannot changeChecked against official sourcesTax BakersHow to do a bank reconciliationSteps: 1. Get the statement; 2. Match every transaction; 3. List timing differences; 4. Record missing items; 5. Compare adjusted balances; 6. Investigate and lock.THE PROCESS AT A GLANCEHow to do a bank reconciliation1Get the statementThe bank statement for the month, with itsending balance2Match every transactionTick each statement line against your books,and each book entry against the statement3List timing differencesDeposits recorded in your books but not yeton the statement, and payments recorded butnot yet cleared4Record missing itemsBank fees, interest and transactions thatwere never booked5Compare adjusted balancesThe adjusted bank balance should equal yourbook balance6Investigate and lockResolve any difference, then mark the monthreconciled so it cannot changeChecked against official sourcesTax Bakers
The process at a glance: 1. Get the statement; 2. Match every transaction; 3. List timing differences; 4. Record missing items; 5. Compare adjusted balances; 6. Investigate and lock.

Why reconcile?

Bank feeds into accounting software can miss, duplicate or mislabel transactions. A reconciliation checks every line, so the balance in your books is the real one. It is the foundation for accurate profit, tax returns and cash planning. See bookkeeping basics.

How do you reconcile, step by step?

  1. Get the statement

    The bank statement for the month, with its ending balance.

  2. Match every transaction

    Tick each statement line against your books, and each book entry against the statement.

  3. List timing differences

    Deposits recorded in your books but not yet on the statement, and payments recorded but not yet cleared.

  4. Record missing items

    Bank fees, interest and transactions that were never booked.

  5. Compare adjusted balances

    The adjusted bank balance should equal your book balance. Adjust the statement balance by adding deposits in transit and subtracting outstanding payments.

  6. Investigate and lock

    Resolve any difference, then mark the month reconciled so it cannot change.

What does a worked example look like?

ItemAmount
Bank statement ending balance, June 30$12,400
Add: deposit recorded June 30, cleared July 1+ $1,500
Less: check issued June 28, not yet cleared- $900
Adjusted bank balance$13,000
Balance in the books before corrections$13,025
Less: bank fee not yet recorded- $25
Corrected book balance$13,000

The two balances agree, so June is reconciled.

How do you find a difference that will not go away?

  • Check whether the difference equals a single transaction, which is often missing or duplicated.
  • A difference divisible by 9 often means two digits were transposed.
  • A difference of exactly twice an amount often means it was entered on the wrong side.
  • Check that the opening balance matches last month's reconciled balance.

Which other accounts need reconciling?

Every account with a statement: credit cards, loans, PayPal, Stripe and marketplace balances. For marketplaces, reconcile each settlement to the deposit. See bookkeeping for Amazon sellers.

Loan and card entries are explained in how to record loans and credit cards.

What if you are months behind?

Reconcile month by month, starting with the oldest. See catch-up bookkeeping.

Want your accounts reconciled every month?

We reconcile every bank, card and platform account monthly and follow up every difference, so your books always match.

Book a call Chat on WhatsApp

Questions people ask

What is a bank reconciliation?

A check that the balance in your books matches the bank statement, after allowing for timing differences.

How often should I reconcile my bank account?

Every month, for every bank, card and payment account.

What are deposits in transit?

Deposits recorded in your books that have not yet appeared on the bank statement.

Why won't my bank reconciliation balance?

Usually a missing, duplicated or transposed transaction, or an opening balance that differs from last month's reconciled figure.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IRS Publication 583: Starting a Business and Keeping Records
  2. IRS: How long should I keep records?

Rules and fees change. If you are reading this long after September 30, 2026, confirm the figures with the source before you rely on them.

BookkeepingBookkeeping basics for small business ownersBookkeepingCatch-up bookkeeping: fixing months or years of missing booksBookkeepingHow to set up a chart of accounts

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This guide is general information. It is not tax or legal advice for your situation.