Bank Reconciliation Guide
The full workflow, one worked example, and a sign-off sheet that satisfies most auditors.
What reconciliation actually is
Bank reconciliation compares two records of the same account: the bank statement and your internal books. The goal is to end the period with both records showing the same balance and the same transactions. Any difference is either a timing gap (a check written but not yet cleared), an error (something entered twice or missed), or an unrecorded transaction (a bank fee, a merchant fee, an interest charge).
The five-step workflow
- Set the ending balances: record both the bank ending balance and the book ending balance for the period.
- Match cleared transactions: tick off every transaction that appears on both sides.
- Identify outstanding items: transactions in the books but not yet on the statement. These are usually checks not yet cleared or deposits in transit.
- Identify bank-only items: transactions on the statement but not in the books. These are usually bank fees, interest, or wires you have not yet recorded.
- Adjust and confirm: record the bank-only items in your books, then confirm that the adjusted book balance equals the adjusted bank balance.
Worked example
| Bank statement ending balance | 12,480.55 |
| Add: deposits in transit | 1,200.00 |
| Less: outstanding checks (2) | (465.20) |
| Adjusted bank balance | 13,215.35 |
| Book ending balance | 13,232.35 |
| Less: bank service charge | (22.00) |
| Add: interest earned | 5.00 |
| Adjusted book balance | 13,215.35 |
| Difference | 0.00 |
Common exception patterns
- Off by a decimal: a data-entry error. Search for the amount without the decimal shift.
- Off by twice a transaction: something was recorded on the wrong side (debit as credit).
- Off by a round number: a missing bank fee or interest line.
- Persistent small drift: a rounding issue in an FX transaction; check the currency conversion.
Sign-off sheet
At the bottom of the reconciliation, record who prepared it, who reviewed it, and the date. Two signatures from different people is the standard control for anything larger than a sole proprietor.
Where a bank statement analyzer fits
Automated tools do the match step in seconds, which is the tedious part. They cannot do the identify-and-adjust steps for you, because those require judgment. Karchu highlights the exceptions and lets you accept or explain them in one click. The workflow above still applies; the tool just gets you to the exceptions faster.