Glossary
Bank reconciliation
Matching every transaction in the books to the bank and card statements for the period, so the books and the bank agree to the cent. The test of whether bookkeeping has actually been done.
Reconciliation is how errors surface: a duplicate invoice, a missing payout, a fee the bank charged that nobody recorded, a transfer between accounts booked as income. Books that are "categorised" but not reconciled are guesses. Monthly reconciliation keeps the search small; a year-end reconciliation of twelve months is a catch-up project.
A reconciled balance sheet is also what a lender, an investor or the IRS relies on. If the bank balance in the books does not match the statement, nothing built on it can be trusted.
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