What Does It Mean to Reconcile Your Bank Statement?
Gain confidence in your financial data. Understand the vital practice of cross-referencing your personal money records with your bank's official statements for precision.
Reconciling your bank statement means comparing your personal financial records with the records provided by your bank. This process ensures that both sets of information agree and accurately reflect your financial standing. It confirms that every transaction, whether money coming in or going out, is correctly accounted for by both you and your financial institution.
Understanding Bank Reconciliation
Bank reconciliation involves a systematic comparison between your personal financial ledger, such as a checkbook register or a budgeting application, and the monthly statement issued by your bank. The goal is to verify that all financial activities, including deposits, withdrawals, and electronic transfers, match precisely across both sets of records. Regularly performing this comparison aids in identifying any unrecorded transactions, processing delays, or even unauthorized activity that might appear on your statement. It allows you to catch errors or omissions, such as a forgotten cash withdrawal or an automatic bill payment you didn’t log.
Steps to Reconcile Your Bank Statement
To begin the reconciliation process, gather your most recent bank statement and your personal financial records, like a transaction log or digital ledger. Start by comparing each transaction listed on your bank statement against the entries in your personal records. As you find a match, place a small mark next to the corresponding entry on both documents.
Next, identify any transactions recorded in your personal ledger that have not yet appeared on your bank statement. These are typically outstanding items, such as checks you have written but the recipient has not yet deposited, or recent deposits you made that the bank has not yet processed. Adjust your personal record’s balance by adding any outstanding deposits and subtracting any outstanding checks or withdrawals.
Addressing Discrepancies
If, after performing the reconciliation steps, your personal record balance does not match your bank statement balance, discrepancies exist that require investigation. Common reasons for these differences include mathematical errors in your personal calculations or overlooked bank fees. You might also find unrecorded interest earnings or transactions you mistakenly entered twice.
To resolve these differences, first re-check all your arithmetic in your personal records. Then, carefully review your bank statement for any items you may have missed logging, such as monthly service charges or ATM fees. If the discrepancy persists after reviewing your records for these common issues, it may indicate a bank error, such as a misposted deposit or an incorrect charge. In such cases, contact your bank’s customer service with specific transaction details; they usually begin an investigation within one to two business days.