How to Reconcile a Bank Statement

To reconcile a bank statement, you compare the transactions in your own records against the ones on the bank statement, check off everything that appears on both sides, and explain the few that only show up on one. When both balances agree and nothing is left unexplained, the account is reconciled.

The two sides rarely match on the first look, and that's normal. A check might not have cleared yet, or a fee hit the bank before you recorded it. Reconciling finds those gaps and confirms nothing is missing, doubled, or wrong.

The process, step by step

The tool changes, but the steps don't.

1. Enter the statement's ending balance and closing date.
2. Go down the statement line by line, finding each transaction's match in your books and marking it cleared.
3. Watch the running difference shrink toward zero as you clear matches.
4. Once you've been through every line, stop. Whatever's left unmatched is the part that matters.
5. Explain those leftovers, get the difference to zero, and save the report.

Matching by amount is usually faster than by date, since a specific figure stands out. Clearing all your deposits first, then all your payments, also keeps you from losing your place.

What to do with unmatched transactions

After a full pass, the unmatched items fall into three groups:

• Things you recorded that the bank hasn't cleared yet, like a check written late in the month. That's a timing gap, not an error, and it'll clear next period.
• Things the bank processed that you never logged, like a fee or interest. Those are real, so add them to your records.
• Actual errors: an amount typed wrong, a payment entered twice, a deposit that never reached the bank. Catching these is the whole point.

When it won't balance

If the difference won't hit zero, the size of the gap is a clue. A gap that divides evenly by 9 usually means transposed digits, like $45 for $54. A gap equal to a transaction amount means you recorded that item twice or skipped it.

If neither fits, recheck the unmatched rows by hand. Don't force it to zero with an adjustment entry, since that hides the problem instead of fixing it.

Reconciling in QuickBooks, Xero, and other tools

Most software follows the same pattern:

• QuickBooks (Online or Desktop), NetSuite, Sage 50, and Quicken: Enter the statement's ending balance and date, then check off transactions until the difference reads zero.
• Xero: Instead of a balance and checkboxes, you work a Reconcile tab with bank lines on the left and suggested matches on the right, clearing them as your bank feed brings them in.

Whichever you use, the five steps above still apply. Only the buttons and menu names change.

Getting the statement out of a PDF

The first snag is usually the statement itself. Banks send them as PDFs, and neither a spreadsheet nor most accounting imports read a PDF's rows cleanly. Copying and pasting tends to jam the date, description, and amount into one column, and a scanned statement won't paste at all.

If you're fixing that by hand each month, you can convert the PDF bank statement into Excel or CSV in your browser first. It reads scanned and password-protected files, takes several at once, and installs nothing, so the rows come out ready to match.