Reconciliation
Also known as: Bank Reconciliation, Account Reconciliation
Reconciliation is the monthly check that your books match your bank and card statements — same transactions, same ending balance.
What it actually means
Reconciling an account means comparing every transaction in your books against the bank or credit card statement for the same period and resolving anything that doesn't line up. Bank feeds miss transactions, double-import after a reconnection, and can't distinguish a duplicate from a genuine repeat charge, so an unreconciled file drifts quietly out of sync. When the ending balances agree, you know the ledger reflects reality and every report built on it can be trusted. Reconciliation is the step that separates a plausible profit and loss statement from a reliable one, and it is the first thing skipped when books fall behind.
Your books show a $12,480 ending balance for March and the bank shows $12,105 — the $375 gap is a check that hasn't cleared yet.
For a local business, unreconciled books surface at the worst moment — a lender asks for statements, or your CPA finds a duplicated deposit that inflated last year's revenue. Reconciling monthly means a missing vendor payment gets caught in week one, not next April.
Related terms
The monthly close is the routine of finishing a month's books — categorizing everything, reconciling every account, and finalizing the reports.
The general ledger is the complete record of every transaction your business has posted, organized by account.
A balance sheet is a snapshot of what your business owns, what it owes, and what is left over for the owners on a specific date.
A chart of accounts is the master list of every category your business records money into — each income, expense, asset, liability, and equity bucket.
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