How to reconcile a bank statement

Why it’s worth doing

A monthly reconciliation catches mistakes while they’re still easy to fix: a payment entered twice, a typo in an amount, a fee nobody recorded. It shows up charges you didn’t make while there’s still time to report them to the bank. And it tells you how much money you really have, rather than what your records think you have.

Your tax return, your accountant’s work and any loan application all assume that cash figure is right.

What you need

• The bank statement for the month, with its opening balance, closing balance and every transaction.
• Your own record of the account for the same dates: your accounting software, a spreadsheet, or a checkbook register.
• Last month’s reconciliation, if you did one. Anything that hadn’t cleared then (a deposit, an uncashed check) should show up on this statement, or still be waiting.

The seven steps

1. Check the opening balance. The statement’s opening balance should equal last month’s closing balance, and your record’s starting point should match last month’s reconciled figure. If either is off, fix that first: everything after it will be off by the same amount.
2. Check the statement adds up. Opening balance + money in − money out should equal the closing balance. On a typed-up spreadsheet, check the running balance row by row too. If your statements are PDFs, our bank statement converter does this check for you as it turns them into a spreadsheet, QuickBooks or Xero file.
3. Tick off what matches. Go down the statement and tick each transaction that’s also in your record. Match on the amount first, then the date.
4. List what’s in your record but not on the statement. Usually deposits made at the end of the month (deposits in transit) and checks or payments that haven’t cleared yet (outstanding checks). These adjust the bank’s side.
5. List what’s on the statement but not in your record. Bank fees, interest, a returned (NSF) check, an automatic payment you forgot. Add each one to your record now. These adjust your side.
6. Work out both adjusted balances. Bank: ending balance + deposits in transit − outstanding checks. Yours: ending balance + money in you missed − money out you missed, corrected for any wrong amounts. They should be equal.
7. Record the corrections, save it, and carry the open items forward. Enter the items from step 5 in your books (in accounting software, as transactions; on paper, as adjusting entries). Keep the reconciliation with the statement. The deposits in transit and outstanding checks are the first things to look for on next month’s statement.

The terms you’ll see

A worked example

March, made-up numbers. The statement ends at 6,035.15. Your record ends at 6,724.34. Here’s what the matching turned up:

Bank’s side 6,332.65 = Your side 6,332.65 Reconciled

Both sides come to 6,332.65, so March is reconciled. The five items on your side really happened, so record them in your books, then look for the March 31 deposit and checks 1043 and 1046 on April’s statement. Written out like this, the two tables are your bank reconciliation statement.

Watch one done

If you’d rather see it, this 4½-minute video works through a complete reconciliation the same way: the bank’s side, your side, and the corrections to record afterwards.

“How to Prepare a Bank Reconciliation” by Jonathan Wild

When it won’t balance

Work out the difference between the two adjusted balances, then check these in order:

1. The opening balance. If someone edited or deleted an old transaction after last month was reconciled, every month since is off by that amount.
2. One item equal to the difference. Look for a transaction of exactly that amount that’s missing from one side.
3. One item equal to half the difference. A payment recorded as a deposit, or the other way round, throws the balance out by twice its amount. A difference of 98.00 often means a 49.00 item with the wrong sign.
4. A difference that divides evenly by 9. That’s the sign of swapped digits: 68.40 typed as 86.40 makes a difference of 18.00, and 18 divides by 9.
5. Doubles. The same transaction entered twice, often once by hand and once from a bank feed or an imported file.
6. Dates. Items dated in the wrong month, or a statement period that doesn’t start where your record does.
7. The wrong account. A transaction posted to savings instead of checking, or to the wrong card.
8. The bank. Banks rarely make mistakes, so check your own record first. If you’ve been through everything above, call them, and don’t wait: banks set a time limit for reporting errors.

Why a match isn’t proof

Two mistakes can cancel out. Say a 45.00 fee was entered as 54.00, which is 9.00 too much going out, and a 120.00 deposit as 129.00, which is 9.00 too much coming in. Your ending balance still matches the bank to the cent, even though both rows are wrong.

You catch it by comparing more than the ending balance. The money-in and money-out totals should each match the statement, and your running balance should match the bank’s on every line. The first line where they differ is where the mistake is.

Footing and crossfooting

Footing means adding up a column. Crossfooting means adding across the rows and checking the totals agree both ways. It’s an old accounting check that a table of numbers adds up:

Footing the Net column gives 1,423.69. Crossfooting the totals row gives 3,201.31 − 1,777.62 = 1,423.69. They agree, so the table adds up.

On a bank statement the same idea becomes: the money-in and money-out columns add up to the statement’s totals, opening + in − out = closing, and doing that on every line gives you the running balance. It catches arithmetic and reading mistakes. It doesn’t catch a transaction that’s missing from both sides, which is why you still do the matching in steps 3 to 5.

Credit cards and personal accounts

• Credit cards work the same way, with the signs flipped: the balance is what you owe, purchases raise it, payments and refunds lower it. A payment you sent on the 30th that the card company posts next month is the card’s version of a check that hasn’t cleared.
• Cards with several cardholders put everyone’s charges on one statement. Reconcile the whole statement against all the cards together, not one person’s charges.
• Transfers between your own accounts appear twice, once in each. Make sure each side is recorded in the right account and month, or both accounts end up off.
• Personal accounts follow the same steps, against your budgeting app, a spreadsheet or a checkbook register. Monthly is plenty for most people.
• QuickBooks Online and Xero have a reconcile screen that does steps 3 to 6 for you once the transactions are in. If you’re bringing in months the bank feed doesn’t cover, see how to import bank statements into QuickBooks Online.

Keep the original statement with the finished reconciliation. Before clearing out old files, check how long to keep bank statements: personal, tax and business records do not all follow the same schedule.

Free template and calculator

The template has two sheets: the March example above, filled in, and a blank one for your month. Type your numbers into the yellow cells and it works out both adjusted balances, the difference, and whether it’s balanced. It works in Excel, Google Sheets and Numbers.

Download the template (.xlsx)

Or check your numbers here

Totals are enough: add up each list first. Nothing you type leaves this page.