The Steps For Account Reconciliation

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Steps For Account Reconciliation

Account reconciliation is the process of comparison of the debit and credit balances of an account, and verifying the tallying of the account. Here, we have provided four easy steps to account reconciliation which will help you compare statements of transactions and accounting records so that there is no divergence.

The process of account reconciliation is used when the transactions are recorded using the double entry system. In the double entry bookkeeping system, a single transaction has two effects. The effects of debit and credit are used in the process of the double entry system. The two effects can be cross confirmed by tallying the account. Due to this, all the accounts, if recorded properly, have balancing figures at the end of the month or year (or whenever the account closes).

What Is Account Reconciliation


Nowadays, this term mostly refers to, what is known as bank reconciliation. The term account reconciliation has a wider meaning. It refers to the tallying of two sets of transactions. For example, after you use your credit card, you receive a receipt that you stack away. After you receive the monthly bill from your credit card company, you compare it with your stack of receipts. This is known as account reconciliation and if the reconciliation is regarding your bank account, then it is referred to as bank reconciliation. Reconciliation is done by companies and individuals alike, the only difference is that companies use accounting software for this purpose (due to the enormous size of the transactions) and individuals need to do it manually.

The comparison of the two (accounting records and bank statement) is done in order to find out the outstanding records and to find out their assets and liabilities. It is also carried out to find out how many transactions went unrecorded in the previous accounting period.

What Are The Steps To Account Reconciliation


  • First, gather all the relevant accounting information; this includes, updating your checkbook, getting a bank statement, gathering together all your ATM withdrawal and deposit slips.
  • Jot down the last balancing figure from the bank statement, on the top of a paper. Deduct the bank charges from the balance of your bank account. Compare the deposit slips with your bank statement. If there are any checks (deposits) that have not been cleared or approved in the statement before the ending day of the month, add the amounts to the balancing figure. You can also add any kind of interest that is due, but not received in the balancing figure. This final balancing figure is also termed as the 'running' balance.
  • In this step, start comparing your payment receipts with that of the bank statement. Compare the ATM withdrawal slips, the checks paid and the due payments that have not been passed by the bank. Total all the amounts of the payments and withdrawals and subtract it from the running total. Note down any monthly bills that are deducted directly from your bank account. Deduct the same from your running figure. For example, if your electricity bill is directly deducted from your bank account, then deduct it from your running balance. Once you are done with the deductions, the balance amount that you have should tally with the total balance in your bank statement.
  • If the balance of the bank statement and running figure does not tally, then there is some error. Use a calculator and find out the error in the ending balance of the checkbook register, beginning from the end of the last month's statement. Next, confirm all the payments and withdrawals (those that have been cleared or not cleared). Use your payment and withdrawal slips, while doing so. You will come to know whether the transactions on your slips tally with the bank statement or not.


The most important thing that people tend to forget to include is deposits that have been made but not cleared, at the end of the month. If your calculations do not tally with the bank statement, inform the bank about the mistake, so that the bank can prepare a reconciliation statement of its own. It is recommended that you prepare an account reconciliation statement every month. You will find it difficult to prepare one initially. Here are some useful tips to master it:
  • Whenever you visit the ATM collect the printed form of the transaction and put it aside safely. Keep on collecting a printed slip for every transaction, till the end of the month.
  • Collect the deposits slips of checks and sequentially stack them.
  • Whenever you hand out a check, make it a point to record it in the checkbook register (the one that is attached at the back of your checkbook).
  • The preparation of the account reconciliation will assist you in keeping a tab on your transactions and also help in money management.


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