Accounting Demystified

Bank Reconciliation

The company keeps track of its checking account balance, and each month it receives a statement from the bank. The company needs to make sure that it has recorded everything properly, and it is a good idea to make sure that the bank has recorded everything properly as well (ask your friends—it will be hard to find someone who hasn't been the victim of a bank error). The mechanism for checking the general ledger balance (the ''book balance'') against the bank statement balance (the ''bank balance'') is the bank reconciliation.

It is unusual for the book balance to match the bank balance. For example, if you mailed a check on the last day of the month, you would have reduced your checking account balance, but the check would ...