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Definition
A bank reconciliation compares the transactions recorded in your accounts with those on the bank statement and resolves any differences — a payment not yet cleared, a fee not yet recorded, a duplicated entry. When the two sides agree, the books are reconciled, confirming your records match the money that actually moved.
Why it matters
Done regularly, reconciliation catches errors, missed transactions and even fraud early, and keeps your reported cash position trustworthy. That reliability matters beyond your own desk: when a lender or accountant reviews the business, clean, current reconciliations signal that the numbers can be relied upon and that the company is run with proper control. Sloppy or stale reconciliations have the opposite effect — they make every other figure suspect. Modern accounting software automates most of the matching, but the discipline of reviewing and closing it off each month is what gives the accounts their credibility.
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