BANK RECONCILIATION
How to reconcile a business bank account
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Compare your books with the bank statement. Investigate differences and confirm the reconciliation difference reaches zero.
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Bank reconciliation checks the transactions in your books against the bank statement for a specific period. Downloading a bank feed does not complete this check. The feed brings transactions into the software; reconciliation verifies that the statement activity is accounted for.
For most small businesses, reconcile each bank and credit card account monthly. More frequent review can help when transaction volume is high or cash needs close attention.
Gather the statement and prepare the books
Have the complete statement, including its ending date and ending balance. Review downloaded transactions for the statement period, add missing records, and match entries already in the books. Check that the previous period is reconciled and retain its reconciliation report.
Transactions dated after the statement ending date do not belong in that reconciliation. A recent bank-feed balance is not a substitute for the statement balance.
Start the reconciliation in QuickBooks Online
Open Reconcile in the accounting area and select the account. Navigation labels can differ between QuickBooks views, so use the search or help feature if the menu looks different.
Enter the statement ending date and balance. Confirm the beginning balance before checking off transactions. If it does not agree with the previous statement and reconciliation, stop and investigate opening balances, edited entries, deleted transactions, and changed reconciliation statuses.
Work down the statement line by line. Check off each corresponding transaction in QuickBooks, verifying its amount and account. Multiple recorded customer payments may make up one bank deposit; inspect the deposit detail rather than forcing a one-to-one match.
Understand outstanding checks and deposits in transit
An outstanding check has been recorded in the books but has not cleared the bank. A deposit in transit has been recorded but has not yet appeared on the statement. Leave those items unchecked for that statement period.
They can explain a difference between the bank balance and the register balance. They should not leave an unexplained difference in the QuickBooks reconciliation screen after the statement transactions have been correctly selected.
A worked example
These figures are fictional and assume the outstanding check is the only timing difference.
| Item | Amount |
|---|---|
| Bank statement ending balance | $12,437.19 |
| Outstanding check recorded in the books | ($315.00) |
| Adjusted bank balance | $12,122.19 |
| Book balance at the same date | $12,122.19 |
The balances agree after allowing for the outstanding check. In QuickBooks, leave that check unchecked. The cleared statement activity should reconcile to the $12,437.19 statement ending balance, and the reconciliation difference should be $0.00. When the check appears on a later statement, clear it in that period.
Do not finish with a $315 unexplained reconciliation difference simply because a $315 outstanding check exists.
Investigate a difference that remains
Check these areas before changing anything:
- Statement inputs: Are the ending date, ending balance, and account correct?
- Missing activity: Are bank fees, interest, checks, or deposits absent from the books?
- Duplicates: Was a downloaded line added even though a manual record already existed?
- Incorrect amounts: Does a transaction differ from the statement?
- Deposit grouping: Were several customer payments recorded as a single bank deposit?
- Prior-period changes: Was an already reconciled transaction edited or deleted?
When you find a duplicate, confirm which record should remain and whether it is linked to an invoice or bill before removing it. A correction should preserve the underlying business transaction, not simply erase the inconvenient line.
If an unfamiliar charge appears on the statement, investigate it with the bank and keep a record of any dispute. Do not omit real statement activity solely because you do not yet recognize it; agree on the temporary accounting treatment with your bookkeeper or accountant.
Use adjustments only after investigation
An adjustment can make the reconciliation balance without resolving the original cause. It should not replace checking the records.
Intuit describes a small residual adjustment as a last resort after review. Discuss it with your accountant when the source remains uncertain, and retain the explanation. An adjustment does not automatically make next month's opening balance wrong, but an unjustified one can conceal missing activity or misstate an expense or income account.
Large differences and unexplained beginning balances need investigation rather than a balancing entry.
Finish and review the report
When the difference reaches zero and the selected transactions match the statement, finish the reconciliation and save the report. Review old outstanding checks and deposits separately. An item that remains outstanding for months may need follow-up even if the current statement reconciles.
Reconciliation establishes agreement with the statement after valid timing differences. It does not establish that every transaction has the correct category, that all sales were recorded, or that the whole balance sheet is correct. Pair it with a profit and loss review and your regular close checklist.
Keep reconciliation manageable
Review transactions during the month, collect documents while details are fresh, and schedule the statement reconciliation. If prior periods are tangled, agree on a cleanup plan before treating the current month as complete.
Monthly bookkeeping support includes bank and credit card reconciliations with report review. Book a free consultation to discuss the accounts and periods you need help with.
Three things to remember
- Use the statement date and balances, not today's bank-feed balance.
- Leave valid outstanding items unchecked; the reconciliation difference should still reach zero.
- Reconciliation checks statement activity. Expense categories need their own review.