Free course · Lesson 7 of 12 · 11 min
Bank and credit card reconciliation
Reconciling means proving your books agree with the bank's statement. It is the check that catches missing, doubled and wrong entries, and it takes minutes once it is a monthly habit.
Bookkeeping Basics / Lesson 7
- Explain why the bank balance and the book balance differ.
- Reconcile a bank account step by step.
- Reconcile a credit card statement.
- Track down a difference without forcing the books to match.
Why the two balances differ
Your books and the bank record the same money, but not always at the same time. A cheque you wrote on the 29th may not clear until next month. A deposit you made on the last day may not appear until the next statement. The bank may charge a fee or pay interest that you have not entered yet. And sometimes there is a plain mistake.
- Outstanding cheques and payments: in your books, not yet on the statement.
- Deposits in transit: in your books, not yet on the statement.
- Bank-only items: fees, interest, returned (NSF) cheques, automatic charges you have not entered.
- Errors: an amount typed wrong, a transaction entered twice or not at all.
Step by step
- Get the statement. Note its ending date and ending balance.
- Check that the beginning balance matches the ending balance of last month's reconciliation. If it does not, something already reconciled was changed.
- Enter any bank-only items you have not recorded yet, such as fees and interest.
- Tick off each deposit and each payment that appears on both the statement and your books.
- What is left unticked in your books should be outstanding items. What is left unticked on the statement is missing from your books: enter it.
- The difference should now be zero. Save the reconciliation and keep the report.
Worked example
The March 31 statement shows an ending balance of $8,420.15. In the books: cheque 112 for $350.00 and cheque 115 for $1,200.00 have not cleared, and a $900.00 deposit made on March 31 is not on the statement. The statement shows a $15.00 monthly fee and $2.35 of interest that are not in the books yet. The book balance before adjusting is $7,782.80.
| Amount | |
|---|---|
| Statement ending balance | $8,420.15 |
| Add: deposit in transit | +$900.00 |
| Less: cheque 112 outstanding | −$350.00 |
| Less: cheque 115 outstanding | −$1,200.00 |
| Adjusted bank balance | $7,770.15 |
| Amount | |
|---|---|
| Book balance before adjusting | $7,782.80 |
| Less: bank service fee | −$15.00 |
| Add: interest earned | +$2.35 |
| Adjusted book balance | $7,770.15 |
Both sides come to $7,770.15, so the account is reconciled. The two entries the books needed were:
| Account | Debit | Credit |
|---|---|---|
| Bank and card fees (expense) | $15.00 | |
| Bank | $15.00 | |
| Bank | $2.35 | |
| Interest income | $2.35 |
Reconciling a credit card
It works the same way, but the balance is what you owe. Tick each charge and each payment on the statement against the card account in your books, enter any interest or annual fee, and check that the books show the same balance owed as the statement. If you pay the card off, record the payment from the bank to the card account (lesson 6), not as an expense.
When it will not balance
- Difference equals one transaction: look for that amount, missing or entered twice.
- Difference divisible by 9: often two digits swapped, such as $54 typed as $45 (a difference of $9).
- Difference is twice an amount: a deposit entered as a payment, or the other way round.
- Beginning balance does not match: a transaction from an earlier, already reconciled month was edited or deleted. Find it with the audit trail.
Reconcile every bank, savings, credit card and loan account every month, soon after the statement arrives. Your accountant will ask for the reconciliation reports at year end.
Key terms
Try it
- Bank reconciliation template: The worked example above, as a printable form.
- How to reconcile a bank account (guide): More examples and common problems.
- Bank reconciliation in AcboBooks: How the feature works.
Check your understanding
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Part of Bookkeeping Basics, a free course from AcboBooks LLC. General information, not tax, legal or accounting advice. Last reviewed October 25, 2026.