GUIDE · BANK RECONCILIATION
To do a bank reconciliation, adjust the bank statement’s closing balance for deposits in transit and outstanding checks, adjust the ledger balance for fees, interest and errors the bank caught, and confirm the two adjusted balances are equal. Then record the book-side items as journal entries. AI bookkeeping software can do the matching, but the method is the same.
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DEFINITION
Comparing the cash account in your books with the bank statement for the same period, explaining every difference, and correcting the books so the adjusted ledger balance equals the adjusted bank balance.
SIX STEPS
Do one account and one month at a time, oldest month first. Each month starts from the last one’s reconciled balance.
The closing balance printed on the bank statement, and the cash account’s balance in your ledger on the same date.
Tick off every deposit and payment that appears in both, by amount and date. What’s left unticked on either side is a reconciling item.
Add deposits in transit (in your books, not yet on the statement). Subtract outstanding checks (written, not yet cleared).
Subtract bank fees and returned items the statement shows and your books don’t. Add interest earned. Correct any amount recorded wrong.
The adjusted bank balance must equal the adjusted book balance, to the cent. If it doesn’t, look at the difference itself (see below).
Every book-side adjustment becomes a journal entry. Bank-side items need no entry; they clear on next month’s statement.
Try it on your own documents. One-week free trial, both apps included.
WORKED EXAMPLE
Alder & Finch is a fictional bakery. Its May 2026 bank statement closes at 19,312.40; its ledger shows 18,402.55 in checking. Here is the reconciliation:
| Bank side | Amount | Book side | Amount |
|---|---|---|---|
| Statement closing balance, May 31 | 19,312.40 | Ledger balance, May 31 | 18,402.55 |
| Add: deposit in transit, May 31 | 2,150.00 | Less: monthly bank fee | (35.00) |
| Less: outstanding check 1043 | (1,240.00) | Add: interest earned | 2.20 |
| Less: outstanding check 1045 | (1,825.65) | Add: check 1039 recorded as 452.00, cleared as 425.00 | 27.00 |
| Adjusted bank balance | 18,396.75 | Adjusted book balance | 18,396.75 |
Both sides land on 18,396.75, so May reconciles. The deposit in transit is the last day’s takings, deposited after the bank’s cutoff; checks 1043 and 1045 were mailed to suppliers on May 29 and 30. None of the bank-side items needs an entry. The three book-side items do.
ADJUSTING ENTRIES
Only the book-side items, because those are the ones the ledger got wrong or didn’t know about.
| Entry | Debit | Credit | Amount |
|---|---|---|---|
| Bank fee | Bank fees | Cash: checking | 35.00 |
| Interest | Cash: checking | Interest income | 2.20 |
| Check 1039 correction | Cash: checking | Repairs and maintenance | 27.00 |
After posting them the ledger shows 18,402.55 − 35.00 + 2.20 + 27.00 = 18,396.75, the adjusted balance. Check 1039 paid a repair bill, so the correction goes back to the same expense account it was booked to. The entries are dated May 31 so they land in the month being reconciled.
WHEN IT WON’T TIE
Before the 27.00 error above was found, the two sides were 27.00 apart. The size of a difference usually tells you what to look for.
452.00 recorded for 425.00 is a difference of 27.00, and 27 ÷ 9 = 3. Swapped digits always leave a difference divisible by 9, so scan for amounts with two digits reversed.
Search both sides for that amount. A line recorded twice, or a statement line not recorded at all, leaves exactly its own amount as the difference.
A 300.00 payment booked as a 300.00 deposit leaves a 600.00 difference. Look for a line with half the difference on the wrong side.
If last month didn’t really reconcile, this month inherits its difference. Check that this month’s opening balance matches last month’s reconciled balance.
A proof of cash ties receipts and disbursements, not just balances, and finds offsetting errors a balance-only reconciliation misses.
A LAYOUT TO COPY
Any spreadsheet will do. These rows, in this order, are all a small business needs each month:
| Row | Bank side | Book side |
|---|---|---|
| 1 | Statement closing balance | Ledger balance on the same date |
| 2 | Add: deposits in transit (list each) | Add: interest and deposits the bank recorded first |
| 3 | Less: outstanding checks (list each with its number) | Less: bank fees, returned items, charges |
| 4 | Add or less: bank errors (rare) | Add or less: errors in the books |
| 5 | Adjusted bank balance | Adjusted book balance |
| 6 | Difference (must be 0.00) | Who prepared it and the date |
Keep last month’s outstanding checks on this month’s list until they clear. A check outstanding for months is worth a call to the payee. The reconciliation is one step of the month-end close checklist.
WITH ZERABOOKS
The same method, done when the statement is uploaded.
ON UPLOAD
Upload the bank statement and ZeraBooks checks that it adds up, follows last month’s statement and agrees with the ledger. A month that ties gets a check; one that doesn’t shows the difference. More on bank reconciliation software.
WHEN IT DOESN’T TIE
Verify against the document compares the original statement line by line with your rows and proposes only fixes that make the month tie, each quoting the line it’s based on. You apply them, then sign off and close the month.
Every month, for every bank and card account, when the statement arrives. Busy accounts can be reconciled weekly against the online balance, but the monthly statement reconciliation is the one that counts.
Money you recorded as deposited that the bank hadn’t processed by the statement date, usually the last day’s deposit. Add it to the bank side; it shows up on next month’s statement.
A check you wrote and recorded that hadn’t cleared the bank by the statement date. Subtract it from the bank side and carry it on the list until it clears.
No. Deposits in transit and outstanding checks are already in your books; the bank catches up next month. Only book-side items, such as fees, interest and errors, need entries.
Yes. Use the card statement’s new balance, and treat charges not yet posted like outstanding checks. Payments and charges are compared instead of deposits and checks.
ZeraBooks reconciles every account month by month as soon as a statement is uploaded, from $79 a month billed annually after a 7-day trial. Prefer someone else to do it? Our bookkeeping services team reconciles and closes each month for you.
ONE-WEEK FREE TRIAL
ZeraBooks reconciles on upload and shows any difference with the line behind it. Free for 7 days, then $79 a month billed annually; see ZeraBooks pricing.
Last updated October 18, 2026 · Written by Damin Mutti, founder of ZeraBooks