Life would be wonderful if you could open the envelope with your bank statement, compare the bank balance with the bank balance you have recorded in the general ledger, grunt happily when you see they are the same, then put away the bank statement and never look at it again.

Unfortunately, that rarely, if ever, happens. There are many reasons why the balance on your statement may not match the balance in your records.

 

Outstanding checks

It's quite possible that you have written and mailed checks that have not yet cleared the bank. This would mean that your accounting balance in your ledger would show a decrease by the amount of those checks, but they would not yet be reflected by the bank. This difference is true and does not represent an error. It will be one of the items taken care of in the reconciliation process.

 

Outstanding deposits

You may also have situations where you have made a deposit at the bank on the last day of the month, but the bank processed it with the next business day's date on it. In this case, your ledger balance would be increased by the amount of the deposit but it would not yet be reflected in the bank statement. This is also an acceptable difference and will also be taken care of in the reconciliation process.