Definition: A bank reconciliation is known as the process of matching and comparing figures from the accounting records to those displayed on a bank statement.
Any transactions that appear in the accounting records but do not appear in the bank statement are said to be 'outstanding'. The items which are outstanding represent possible discrepancies which need to be uncovered.
Discrepancies may include:
Performing a bank reconciliation regularly severly reduces the number of errors that can occur in an accounts system and makes it easier to find missing purchases and sales invoices.