How to do a bank reconciliation, step by step
A bank reconciliation proves that the cash in your books matches the cash in your bank, and explains every difference. It is the single best check that your books are complete.
The six steps
- Gather the statement and your records for the same period, starting from the last reconciled balance.
- Match deposits. Tick off each deposit in your books against the statement.
- Match withdrawals. Tick off checks, card payments, transfers and fees.
- List timing differences. Deposits you recorded that the bank has not cleared yet (deposits in transit) and checks you wrote that have not been cashed (outstanding checks).
- Record bank-only items in your books: fees, interest, returned customer payments and any automatic payments you missed.
- Confirm both sides agree, then save the reconciliation and note anything you are still investigating.
A worked example
| Bank side | Amount |
|---|---|
| Statement ending balance | $8,420 |
| + Deposit in transit | $1,150 |
| − Outstanding check #1041 | $600 |
| − Outstanding check #1043 | $270 |
| = Adjusted bank balance | $8,700 |
| Book side | Amount |
|---|---|
| Balance in your books | $8,765 |
| − Monthly bank fee not yet recorded | $25 |
| + Interest earned not yet recorded | $5 |
| − Customer check returned unpaid | $45 |
| = Adjusted book balance | $8,700 |
Both sides reach $8,700, so the account is reconciled. The fee, interest and returned check are recorded in the books. The deposit and the two checks need no entry; they will clear on next month's statement.
When it doesn't balance
- Check that you started from last month's reconciled balance.
- Look for a transaction recorded twice, or not at all.
- If the difference divides evenly by 9, look for transposed digits, such as $54 entered as $45.
- If the difference is exactly twice an amount, look for a deposit entered as a payment or the reverse.
- Search for the exact difference amount; it often matches one missing transaction.
How often to reconcile
Every month for every bank and credit card account, as part of your month-end close. Businesses with many transactions often reconcile weekly so problems surface sooner.
Doing this in YourAILedger
YourAILedger imports bank statements as CSV or Excel files, matches them to your recorded transactions, and shows what does not match so you can resolve each difference with the evidence attached. Live bank feeds are not available yet. See bank reconciliation software.
Common questions
What is a deposit in transit?
Money you have recorded as deposited that has not yet appeared on the bank statement, usually because it was deposited at the end of the period.
Should I reconcile credit cards too?
Yes. Reconcile every account that holds or owes business money, including credit cards, loans and payment processor balances.
Keep your books this way without the busywork
YourAILedger tracks inventory, purchase orders and suppliers, reconciles imported bank statements and guides your month-end close. Plans start at $29 a month.
No credit card required.
This guide is general education, not tax, legal or accounting advice. Rules vary by business and location, so confirm your situation with a qualified professional.