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Reconciliation: Definition and Meaning
Definition
A reconciliation is the process of comparing two records or balances and investigating differences until they are explained or corrected.
Why It Matters
Regular reconciliations help improve accounting accuracy and can identify omissions, duplicate entries, timing differences, fraud risk, posting errors, or incomplete records. Common reconciliations include bank accounts, credit cards, accounts receivable, accounts payable, payroll liabilities, loans, and intercompany balances.
Reconciliations should be completed on a consistent schedule and reviewed by someone with appropriate responsibility.
Example
A business compares its accounting-system cash balance with its monthly bank statement and investigates outstanding checks, deposits in transit, fees, and differences.
Related Terms
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