What Is Reconciliation?
Reconciliation is the process of comparing two sets of records to confirm they agree, and investigating and resolving any differences. In accounting, it verifies that account balances are accurate — most commonly matching the books against bank statements, subledgers, or supporting documents.
What reconciliation is and why it matters
Reconciliation is the control that keeps the books honest. Because errors, timing differences, omissions, and fraud all show up as mismatches between two independent records, reconciling forces every discrepancy to be found and explained. It applies broadly: bank reconciliations match cash records to bank statements; subledger reconciliations confirm the AR or AP detail ties to the general ledger; intercompany and balance-sheet reconciliations verify other accounts. For accounting firms, reconciliation is the highest-volume recurring task and the foundation of a reliable close — statements can't be trusted until the underlying accounts reconcile.
A worked example
A firm reconciles a client's accounts-receivable subledger to the general ledger at month-end. The GL control account shows $85,000; the subledger detail (all customer balances) sums to $83,500 — a $1,500 gap. Investigating, the firm finds a $1,500 payment was posted to the GL but not applied to the customer's subledger record. Applying it brings the subledger to $85,000, matching the GL. The accounts are reconciled and the difference is explained.
How firms handle it today
Firms reconcile bank accounts, subledgers, and key balance-sheet accounts each period — matching records line by line, chasing unexplained differences, and documenting the resolution. It's the most time-consuming part of many closes.
How OCTA Flow relates to reconciliation
OCTA Flow automates the matching across reconciliations — comparing records, matching items, and surfacing only the exceptions by severity while logging everything to the audit trail — so your team resolves the true discrepancies instead of matching every line by hand.
Related terms
- Bank reconciliation
- General ledger
- Audit trail
- Trial balance
- Subledger
FAQ
What does reconciliation mean in accounting?
Comparing two sets of records to confirm they agree, then investigating and resolving any differences.
What are common types of reconciliation?
Bank reconciliations, subledger-to-general-ledger reconciliations, intercompany reconciliations, and balance-sheet account reconciliations.
Why is reconciliation important?
It catches errors, omissions, and fraud, and ensures account balances are accurate before financial statements are produced.
See how firms automate reconciliations → start an OCTA Flow trial.