What It Means
Bank reconciliation means comparing the record you keep of an account, such as a check register or a budgetBudgetA plan for a set period, usually a month, that lists the money you expect to receive and how you'll spend or save it. See more app, with the statement your bank sends, and accounting for every difference. Many differences come from timing, like a check the bank hasn't paid yet or a deposit made after the statement closed. Others are real mistakes or charges you never recorded. When both sides are adjusted to the same date and agree, the account is reconciled.
Try It: Reconcile One Month's Statement
Bring both sides to the same date, and the two adjusted balances should match. Example numbers from one month.
Reconciled. Both sides agree, so your register is right as of the statement date.
The two sides are apart. Look for a missed entry, one recorded twice, or a number copied wrong.
How It Sounds at Home
- "I'm off by fifteen dollars and I can't find it."
- "That check still hasn't cleared."
- "Let me sit down with the statement tonight."
The Breakdown
A short example. Jordan keeps a running register for the family's checking accountChecking accountA bank or credit union account for everyday money going in and out, used by debit card, checks, transfers and direct deposit. See more. The March statement closes on the 28th with an ending balance of $2,140, and Jordan's register says $2,095.
| Item | Amount |
|---|---|
| Statement ending balance | $2,140 |
| Plus: deposit made on the 30th, after the statement closed | $250 |
| Minus: check to the plumber, not cashed yet | $310 |
| Adjusted bank balanceAccount balanceThe money in a bank account once posted deposits and payments are counted, also called the ledger balance; pending card purchases aren't subtracted yet. See more | $2,080 |
| Register balance | $2,095 |
| Minus: monthly service feeMonthly maintenance feeA charge a bank or credit union takes each month for keeping a checking, savings or money market account open, often waived if you meet set conditions. See more on the statement, never recorded | $15 |
| Adjusted register balance | $2,080 |
Both sides reach $2,080, so the account is reconciled.
Where it goes wrong. Skipping a few months lets small gaps pile up, like an unrecorded fee here and a debit card purchase entered twice there. Once several are mixed together, it's much harder to tell which one caused the difference.
What to watch for
- Checks and deposits that haven't reached the bank yet, which cause many honest differences.
- Fees, interestInterest rateThe yearly percentage a lender charges for borrowing money, not counting fees; the APR adds certain fees to show a fuller cost. See more and automatic payments on the statement that never made it into your register.
- An entry added when it should have been subtracted, or the reverse.
- A charge you don't recognize, which is worth asking your bank about right away.
Good to Know
The FDIC's Money Smart programSave More TomorrowA savings plan by Richard Thaler and Shlomo Benartzi in which you agree now to raise your retirement contribution each time you get a pay raise. See more calls this process reconciling your account, or balancing your checkbook. It's how you confirm that the money you think is in the account is really there. Financial Security for All, a Cooperative Extension resource, suggests starting from the statement's ending balance, marking off each check and deposit that matches your register, rechecking the math on every entry, and subtracting any service charges or check-printing fees the statement shows. Doing it soon after each statement arrives means a mistake or an unfamiliar charge gets spotted while it's fresh, and your account agreement explains how to report an error to your bank.
FAQ
What's the difference between bank reconciliation and balancing a checkbook?
They're the same job. The FDIC's Money Smart materials use both names for comparing your register with the bank statement and explaining the difference.
How often should I reconcile my bank account?
Each time a statement arrives, while the month is still fresh in your mind. If you've fallen behind, Financial Security for All, a Cooperative Extension resource, has a guide to catching up on a checkbook that hasn't balanced for several months.
What's an outstanding check?
A check you've written and subtracted in your register that the bank hasn't paid yet, so it isn't on the statement. You subtract outstanding checks from the statement balanceStatement balanceWhat you owed on a credit card when the billing cycle closed, as printed on that month's statement. See more to bring both sides to the same point.
Do It in Buhata
Reconcile (Premium)
With Premium, open Reconcile to check what you've recorded against your linked bank account, and clear up each difference before the next statement.
Open BuhataRelated Terms and Categories
- Account balance
The money in a bank account once posted deposits and payments are counted, also called the ledger balance; pending card purchases aren't subtracted yet.
- Pending transaction
A card purchase or other payment the bank has approved but that hasn't settled yet; it lowers your available balance before it reaches your account balance.
- Available balance
The money in a bank account you can use right now: the posted balance minus pending card purchases and any deposit the bank is still holding.
- Expense tracking
Writing down every purchase and bill as it happens, by category, so you can see where your money actually goes and compare it with your budget.
- Checking account
A bank or credit union account for everyday money going in and out, used by debit card, checks, transfers and direct deposit.
- Overdraft fee
The flat charge a bank adds each time it pays a transaction your checking account couldn't cover, on top of the negative balance you repay.
Sources
FDIC, Money Smart podcast "Balance Your Checkbook"; FDIC, Money Smart "Manage My Checking Account"; Financial Security for All (Cooperative Extension), "How can I balance a checkbook that has not balanced for several months?"; Consumer Financial Protection Bureau, "Managing your checking account"
- www.fdic.gov/news/podcast/moneysmart-basics-banking/balance-your-checkbook
- www.fdic.gov/consumers/education/documents/manage-my-checking-account.pdf
- personal-finance.extension.org/how-can-i-balance-a-checkbook-that-has-not-balanced-for-several-months
- files.consumerfinance.gov/f/201602_cfpb_consumer-guide-to-managing-your-checking-account.pdf
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