How do I do a bank reconciliation?

Compare the bank statement to your books for the same period, mark off every transaction that appears on both, and identify what's left: deposits in transit, outstanding checks, and any bank fees or interest not yet recorded. Adjust both balances for these timing items until the adjusted bank balance equals the adjusted book balance.

By Zuny Fester, Head of Operations and Marketing

Reviewed by Zuny Fester

Published September 10, 2026Last reviewed September 10, 2026Editorial policy

Part of the payment reconciliation and cash application guide.

Step 1	Gather the bank statement and the book's cash ledger for the period
Step 2	Match every transaction that appears on both
Step 3	Identify deposits in transit and outstanding checks
Step 4	Book any unrecorded bank fees or interest, then confirm the balances tie

The process, step by step

Start with the ending balance on the bank statement and the ending balance in the books for the same period. Go through the bank statement line by line, checking off each transaction against a matching entry in the books. Whatever's left unmatched on the bank side that the books already reflect (a deposit made near the period end, before the bank processed it) is a deposit in transit; whatever the books show as paid but the bank hasn't yet processed (a written check not yet cashed) is an outstanding check. Add unbooked bank fees or interest to the books, then confirm the adjusted bank balance and the adjusted book balance are equal.

What to do if it doesn't balance on the first pass

Don't force a plug entry to make the numbers agree — a genuine difference after accounting for timing items means something is actually wrong, most often a duplicate or missing entry, or a transposed amount, and it needs to be traced to its source before the period is considered closed.

Next step

Map the finance workflow with the most exposure and prove the automation path.

Bring the invoice, contract, payment reconciliation, or customer finance workflow you have to defend at audit. Loopfour can map the trigger, controls, integrations, and approval loop.

Book a workflow review

Checklist

Bank reconciliation, step by step

Gather the bank statement and book cash ledger for the same period
Match every bank transaction to a book entry
List deposits in transit and outstanding checks
Book unrecorded bank fees or interest
Confirm adjusted bank balance equals adjusted book balance
Investigate, don't plug, any remaining difference

Frequently Asked Questions

No — it can be done manually with a bank statement and a ledger, though most accounting systems and ERPs include a reconciliation tool that automates the matching step.

Contact the bank directly to dispute it — don't adjust your own books to match a bank error, since that would misstate your own accurate records.

Yes — that's exactly what deposits in transit and outstanding checks account for; you don't need to wait for every item to clear before completing the reconciliation.

Sources

Topic

Payment Reconciliation & Cash Application

Payment reconciliation is the process of proving that every dollar that hit your bank account is accounted for somewhere in your books — matched to a deposit, a payout, an invoice, or an explained var…

Definition

What is a bank reconciliation?

A bank reconciliation compares the cash balance in your accounting records to the balance on the bank's own statement for the same period, adjusting for timing differences like deposits in transit and outstanding checks, until the two amounts agree. It confirms that every transaction the bank recorded is reflected in the books, and vice versa.

How-to

How do I undo a bank reconciliation in QuickBooks Online?

As the primary admin, go to Reconcile, select History by account, find the reconciliation to undo, and choose Undo from that period's Action menu. This permanently deletes the reconciliation's reports and attachments, so download anything you need first — the action can't be reversed.