---
title: "What is bank reconciliation?"
description: "Bank Reconciliation explained in plain English: definition, how it works, an example, and how it appears in QuickBooks and Xero."
url: https://ledgerbpo.com/glossary/bank-reconciliation/
updated: 2026-09-11
publisher: LedgerBPO (SS Support Network LLC)
language: en-US
---

# What is bank reconciliation?

Glossary

Bank reconciliation is the process of comparing a business's accounting records against its bank statement to confirm the two match. Any differences, such as outstanding checks or bank fees, are identified and corrected so the books reflect the true cash balance.

Updated September 2026

## How bank reconciliation works

Every month, the transactions recorded in the books are lined up against the transactions the bank actually processed. Deposits, withdrawals, and fees are checked one by one. Items that appear in one record but not the other, like a check that has not cleared yet, are noted as reconciling items. This is usually done using the bank feed built into the accounting software, which pulls transactions in automatically each day.

Once every transaction is matched or explained, the adjusted book balance should equal the bank statement balance. Differences that cannot be explained usually point to a data entry error or a missing transaction. A clean reconciliation each month is one of the clearest signs that a company's books can be trusted. Reconciling frequently, rather than waiting until month end, makes it far easier to spot and fix a problem while the details are still fresh.

## Example

A shop's books show a cash balance of $12,300 at month end, but the bank statement shows $12,650. Investigation finds a $500 deposit still in transit and a $150 bank fee not yet recorded. Adding the deposit and subtracting the fee brings the book balance to $12,650, matching the bank statement exactly.

## Bank reconciliation in QuickBooks Online vs Xero

QuickBooks Online has a dedicated Reconcile tool that lets you check off each bank transaction against the statement and flags the difference as you go. Xero uses its Reconcile screen with Find & Match to pair bank feed lines against invoices, bills, and manual entries. Both keep a reconciliation history for each account. Both platforms also flag duplicate transactions automatically, which helps prevent the same deposit or payment from being recorded twice.

## Related terms

- [Outstanding check](https://ledgerbpo.com/glossary/outstanding-check/)
- [Deposit in transit](https://ledgerbpo.com/glossary/deposit-in-transit/)
- [Reconciling item](https://ledgerbpo.com/glossary/reconciling-item/)
- [All terms](https://ledgerbpo.com/glossary/)

## How LedgerBPO handles bank reconciliation

We reconcile every bank and card account each month, tracking down outstanding checks, deposits in transit, and unexplained differences before they pile up. A dedicated accountant works directly in your software and flags anything unusual for your review. You get accurate cash balances and a clean audit trail every month. We also investigate any transaction that does not match cleanly instead of leaving it as an unexplained difference.

[Every statement reconciled to the cent](https://ledgerbpo.com/services/bank-reconciliation/)

Next step

## Books closed. Invoices paid. Every month.

Tell us what is going on with your books or billing. You will hear from a named person within 1 business day, with a custom quote and a plan for the first close.

- Reply from a named person within 1 business day
- No setup fee, month-to-month
- Your software, your data, no lock-in

Start with a custom quote

[Get a custom quote](https://ledgerbpo.com/get-a-quote/) [Book a 20-minute call](https://ledgerbpo.com/book-a-call/) Or call [+1-657-777-0006](tel:+16577770006) during US, UK or Australian business hours.

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Source: https://ledgerbpo.com/glossary/bank-reconciliation/ · Contact: https://ledgerbpo.com/contact/ · Full site map for agents: https://ledgerbpo.com/llms.txt