What Is the Meaning of Reconcile Account?

According to the dictionary, to reconcile means:

to make (arguments, ideas, texts, accounts, etc.) consistent, compatible, etc.; bring into harmony

This means that when you reconcile your bank account, you make the information you have consistent with the information the bank has. In other words, you want to add up all the money you spent during the course of the month, and then add up all the money you brought into the account during the month. You then use that information to determine what the balance of your account should be, and you make sure that matches up with the balance being reported to you by the bank.

How to Reconcile Your Account

The first step towards reconciling your account is to gather all of your information together. In order to reconcile your bank account, you will need:

Your bank statement from the bank (or from your online banking website)
Your checkbook ledger describing any checks you wrote
Receipts from debit card purchases
Receipts from ATM withdrawals
Pay stubs or other information about deposits made to your account

Generally, you will want to reconcile your bank account whenever you receive a statement.

Adding Up Your Credits

Start by adding up all of the money you put into your account. Any money you deposited at the ATM, any checks you deposited, or anything else that was directly deposited -such as your paycheck- should be included in this category.

Compare the information you have against the information on your bank statement. For example, if your pay stub says that you were supposed to have received $1000, then make sure that $1000 was actually deposited into your bank account. If you identify any errors or discrepancies between what you think you put in and what the bank thinks you put in, make note of it.

All of the money that you put into the account is a credit. The bank will list it as a credit on the statement, and you should list it as a credit when you make notes to reconcile your account.

Adding Up Your Debits

The next step is to add up the debits, or the money you took out of the account. This includes any checks you wrote, any money you took out of the ATM, or any time you used your debit card.

Compare the receipts you have and the record of the checks that you wrote that you have in your checkbook registrar. These should match with the information the bank lists on your statement. If they don't, make note of any errors.

All of this money spent is listed as a "debit" on your bank statement. The amount of debits you have according to your records should all be added up, and it should match the amount of debits the bank shows you having.

Finishing the Process

You can then add the credits to the starting balance (the amount of money that was in your account at the end of the last period in which you reconciled). This will give you the total amount of money you should have in your account, before debits. For example, if you had a starting balance of $1,000 and made $5,000 in deposits, then that means that a total of $6,000 made its way through your account over the course of that month.

Next, subtract the total amount of debits. For example, if you spent a total of $4,000 on all of your checks, debit card purchases and ATM withdrawals, then you should subtract $4,000 from the $6,000 that you put into the account.

The remaining amount left over (in this example, $2,000) should be the same as the remaining balance in your bank account. If not, then find out why -maybe you have uncleared checks or maybe the bank made a mistake that needs to be addressed.

When to Reconcile Your Accounts

Now that you know what is the meaning of reconcile account, you can go through the process on a monthly basis. Do so for your bank account, savings account, credit card statements or any other financial statements in which money goes in and money goes out, so you can keep track of any mistakes that might be made.