Accounting 101: Part 7

Reconciliation is the step where you check your ledger against reality: does what you recorded match what the bank actually shows?

Why it matters

Every deposit and withdrawal you enter in your ledger should eventually show up on a bank statement. Reconciling means lining the two up, transaction by transaction, and confirming they match. It catches things a ledger alone can’t: a bank fee you forgot to record, a duplicate entry, a check that cleared for the wrong amount.

Uncashed checks

One thing you’ll run into often: you write a check and record it in your ledger right away, but the person doesn’t cash it for weeks (or ever). During that gap, your ledger and your bank statement won’t match — your ledger shows the money as spent, the bank still shows it in your balance. That’s normal. The check stays “outstanding” until it clears, and a good reconciliation process tracks which checks are still open rather than treating the mismatch as an error.

Reconcile regularly — monthly is typical — so a small mismatch gets caught while it’s still easy to trace, instead of turning into a mystery six months later.

Next: Book Balance vs. Bank Balance