Definition Definition

What Is Account Reconciliation? Types of Reconciliation with Examples

What Is Account Reconciliation?

Reconciling is the process in accounting used to compare and verify the accuracy of two separate transactions of a company's single account. The process is usually performed regularly to ensure that recorded transactions between banks or other institutions and correspond to the company account are accounted for accurately at the end of the reporting period. 

Definition 2

Account reconciliation is the reviewing and adjusting of the balance in a personal checkbook to match your bank statement. A checking feature that provides a record of which of the firm’s checks have been paid by the bank.

Understanding the Term "Reconciliation"

Reconciliation is the procedure of ensuring the consistency of two separate sets of accounts. In a broad sense, reconciliation involves updating missing information, correcting errors, and matching, and verifying the records to ensure that transactions of the same account between various parties are consistent and accurate. 

The primary purpose of the reconciliation process is to achieve reliability and accuracy in the records to ensure the integrity of the information so that it helps management planning and decision-making.

Different Types of Reconciliation

Numerous forms of reconciliation are routinely undertaken in the context of a business:

1. Bank Statement Reconciliation

 Checking the company's internal financial record of its bank to ensure that those recorded transactions are accurate. 

2. Inventory Reconciliation

 Checking the company's internal inventory stock records with its actual physical inventory count to ensure all the items in the inventory are accurately accounted for. 

3. Accounts Receivable Reconciliation

 Checking the company's internal accounts receivable records with the total payment received from the customer to ensure that all payments are accurately recorded. 

4. Accounts Payable Reconciliation

 Checking the company's internal accounts payable records with its vendor's invoices and payment records to ensure that all payments are accurately recorded. 

5. Credit Card Reconciliation

 Checking the company's internal credit card transactions record with its credit card provider's record to ensure that all payments, interest, and charges are accurately accounted for. 


Example 1

When a business checks the internal record of its bank account balance with the amount supplied by the bank, this is an example of bank reconciliation. If the two records differ, the business will investigate and address the issue by updating the internal record to reflect the bank's data.

Example 2

When a business verifies its internal record of credit card transactions with the info given by the credit card issuer, this is an example of credit card reconciliation. If the two records differ, the business would examine and address the issue by contacting the credit card company to dispute the transaction.

In Sentences

  • Account reconciliation is the methodology of confirming the integrity of two independent accounts' records.
  • The purpose of reconciliation is to identify and resolve conflicts between records.
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