Bank reconciliation is a routine check where you compare your internal records with your bank statement to make sure every transaction matches. If there are differences, you investigate and resolve them.
Common causes of discrepancies include outstanding checks, deposits in transit, bank fees, and errors. For example, a check you wrote on the 28th might not clear the bank until the next month — your books show it, but the bank does not yet.
Most businesses do bank reconciliation monthly. It is one of the simplest but most effective internal controls to catch errors, detect fraud, and maintain accurate financial records.