Reconciliation
Reconciliation is the process of comparing two sets of records to make sure they agree. In bookkeeping, it most commonly means matching your internal accounting records (like your QuickBooks register) against your bank statement to verify every transaction is accounted for and the balances match. An
Reconciliation Definition
Reconciliation is the process of comparing two sets of records to make sure they agree. In bookkeeping, it most commonly means matching your internal accounting records (like your QuickBooks register) against your bank statement to verify every transaction is accounted for and the balances match. Any differences are investigated and resolved.
Reconciliation in Practice — Example
A small bakery's QuickBooks shows an ending balance of $12,450 for March. The bank statement shows $12,950. During reconciliation, the bookkeeper discovers two outstanding checks totaling $600 that haven't cleared, and a $100 bank fee that wasn't recorded in QBO. After accounting for these items: $12,950 - $600 + $100 = $12,450. The books and bank now agree. The bookkeeper records the bank fee and marks the reconciliation complete.
Why Reconciliation Matters for Your Books
Reconciliation catches errors, fraud, and missing transactions. Without it, you might not notice a duplicate charge, a missed deposit, an unauthorized withdrawal, or a bank fee eating into your balance. It's the single most important bookkeeping habit.
Regular reconciliation also ensures your financial reports are accurate. If your bank balance doesn't match your books, then your balance sheet is wrong — and every decision based on it could be flawed. Monthly reconciliation keeps your data trustworthy.
The longer you go without reconciling, the harder it gets. One month of unreconciled activity might take 30 minutes. Six months might take an entire day — and the chances of finding every discrepancy drop. Make it a monthly ritual.
How Reconciliation Shows Up in QuickBooks
In QuickBooks Online, go to Settings → Reconcile. Select the account, enter the ending balance and date from your bank statement, and QBO shows all uncleared transactions. Check off each one that appears on the bank statement. The difference should reach $0.00 before you finish. QBO saves a reconciliation report you can reference later. For credit cards, the process is identical — reconcile against the credit card statement.
Common Mistakes
FAQ
Q: How often should I reconcile? A: Monthly, ideally within a week of your statement closing date. Some businesses with high transaction volume reconcile weekly. At minimum, never go more than one month without reconciling.
Q: What if my reconciliation won't balance? A: Double-check for missing transactions, duplicate entries, or incorrect amounts. Look for transactions recorded in the wrong month. If you're stuck, a bookkeeper can audit the period and find the discrepancy.
Related Terms
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