Reconciliation of bank statement is another name for bank reconciliation, the process of comparing a business's own record of its bank account with the bank's statement and explaining every difference between the two balances. The main entry gives a full worked example, the formula and the role of automation.
What the process covers
The wording appears in older bookkeeping texts and in exam questions, while modern usage prefers bank reconciliation or bank statement reconciliation. All describe the same task, usually carried out monthly as part of the month-end close.
Differences fall into two groups. Some are items the bank has not yet processed, such as deposits in transit and outstanding checks; these are adjusted on the bank side and need no journal entry. Others are items the bank knows about but the business has not yet recorded, such as bank charges, interest earned, direct debits and cheques returned for insufficient funds; these are adjusted on the book side and recorded in the accounts.
Once both sides are adjusted they should show the same balance. If they do not, the remaining difference points to an error or a problem that needs investigation, such as a transposed figure, a payment posted twice or an unauthorised withdrawal. Regular reconciliation is one of the most basic internal controls over cash, and it helps a business spot fraud and bank errors within the time limits banks allow for reporting them.