What is a reconciling item in a bank reconciliation?
Quick answer
A reconciling item is one transaction that explains part of the difference between the bank statement balance and the balance in the books. Common ones are outstanding checks, deposits the books have not recorded, bank fees and duplicate entries. Once every item is listed, the adjusted balances on both sides should match.
Last updated
Take the free module →Module 7 of the free AI for Accounting & Bookkeeping Firms course, about 12 minutes. No account needed.
Updated · By Robert Breen
Why it matters for a small business
A month-end bank reconciliation is only finished when the difference is zero and every dollar of the gap is explained. The reconciling items are that explanation. They also tell you what to do next, which is the part that matters for the month-end close: some items need an entry in the books, and some only need time.
Getting the label wrong costs money or time. Treat an outstanding check as an error and you may record it twice. Miss a deposit and a client looks as if they never paid. Label each item, add them up yourself, and confirm they equal the whole gap before you sign off. See bank reconciliation for the full process.
The four reconciling items at Harbor Lane Studio, September
| Item | Amount | Type | Entry needed? |
|---|---|---|---|
| Brightwater Dental deposit | $2,315.50 | Missing from the books | Yes, record the deposit |
| Monthly service fee | $35.00 | Bank fee | Yes, record the fee |
| Granite State Paper Co bill | $1,240.00 | Duplicate | Yes, remove or reverse it |
| Corbin Tree & Lawn, check 1027 | $850.00 | Timing difference | No, it should clear later |
From the free bank reconciliation lesson. The business and figures are made up.
In a real lesson: Month-End Bank Reconciliation with ChatGPT: 20 Minutes, Not 3 Hours
In the free Month-End Bank Reconciliation lesson, Harbor Lane Studio, a made-up design studio, closes September. The bank statement ends at $55,205.65 and the ledger at $50,835.15. ChatGPT matches 38 of 40 rows on each side and lists four exceptions with a likely reason for each.
You then check the math yourself: 2,315.50 + 35.00 + 1,240.00 + 850.00 = 4,370.50, the whole gap. Both adjusted balances come to $54,355.65, so the difference is zero. Three items need an entry in the books, and the outstanding check needs nothing.
Try this lesson free or read the step-by-step guide.
Common confusions
Reconciling item vs error
Some reconciling items are errors, such as a duplicate. Others, such as an outstanding check, are correct entries waiting for the bank. Only errors get fixed.
Bank side vs book side
Outstanding checks adjust the bank balance. Unrecorded deposits, fees and duplicates adjust the book balance. Put each item on the right side or the totals will not agree.
Tips
- Give the AI both starting and ending balances so it can check its own matching.
- Tell it to say Needs review when a row could be two things, instead of guessing.
- Add the reconciling items up with a calculator. AI can add wrong.
Related terms
More Business terms
Where you use it: free lessons
- Month-End Bank Reconciliation with ChatGPT: 20 Minutes, Not 3 Hours (ChatGPT, 12 min)
Frequently asked questions
- Do all reconciling items need a journal entry?
- No. Items that are missing from the books, such as a deposit or a bank fee, need one. Timing differences such as an outstanding check do not, because they are already recorded.
- What if the reconciling items do not add up to the difference?
- Something is still unexplained. Do not plug the gap. Look for another unmatched row, a transposed number or a date outside the matching window.