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Bank reconciliation

The Bank reconcilation is the process of matching & comparing the accounting figures as per the accounting records against the figures presented on the bank statement. Basically if you can perform a process which starts with your accounting records, less any items which you know have no relation to the bank statement, then basically the resultant amount of your accounting ledger should reconcile (match) to the balance of your bank statement.


When ledgers were done in big manual books it was important to have regular checks that ensured that they were in balance. It is important to have a reliable source by which to check the accounts ledger against.

The statement of account that came from the bank (now know as a bank statement), would have been hand written delicately by a clerk and checked carefully by the bank manger, could be taken to be as a reliable source, as banks primary business was to ensure that their ledgers were correct to track the flow of money. Hence the bank balance could be taken at the end of a period from the bank and matched to a bank ledger kept by a company's accountant.

Think of Bob Cratchet (from "A Christmas Carol"), father of Tiny Tim, and poor employee of Ebeneezer Scrooge, sitting over his single piece of coal on a cold Christmas eve in 1867 doing his final 'bank reconciliation' on Scrooge's account before heading home for a measly Christmas dinner with his poor family.


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