Guides · Bookkeeping
Bank reconciliation, explained
Bank reconciliation is the routine of checking your own record of cash against the bank's. When the two agree, the books are trustworthy; when they differ, reconciliation is how you find out why.
Why the two differ
Your cash book and the bank statement record the same money from two sides, so they should match — but timing gets in the way. A cheque you have written may not have cleared; a bank charge may not yet be in your book. These differences are normal until reconciled.
Reconciliation lists the differences, explains each, and confirms that once they are accounted for, the two records agree.
Why reconcile regularly
Reconciling often keeps the differences small and fresh, so an unexplained entry is caught while it can still be traced. Leave it for months and the gaps pile up cold, and a genuine error hides among the timing differences.
Regular reconciliation is also a quiet fraud and error check: money that left the account without a matching book entry shows up here first.
How Lekha keeps payments traceable
Lekha records payments and receipts against the bills they settle, so each movement of money is tied to a document and a party, which is exactly what makes reconciling against the bank quick.
Lekha records what your documents say and tracks the money on both sides — what you owe and what you are owed. It records and tracks; it does not replace your accountant.
Questions
- What is bank reconciliation?
- The routine of matching a business's own cash records against the bank statement, listing and explaining the differences until the two agree.
- Why do the cash book and bank statement differ?
- Mostly timing — a cheque written but not cleared, or a bank charge not yet in the book. These differences are normal until reconciled.
- Why reconcile the bank regularly?
- So differences stay small and traceable, errors are caught early, and money leaving the account without a matching entry shows up quickly.