Bank reconciliation statement

Your bank account records are what the bank says you have. This is reflected in your bank statements.

You keep your own set of books – a cash book (or cash ledger) – which records every time money comes in or goes out of your business, whether it's actual cash or a bank transfer. The bank also keeps records of these transactions from their perspective.

Ideally, the balance in your cash book (specifically, the bank column if you have one) should match the balance on your bank statement. However, they often don't match immediately for several reasons:

There are two main reasons for differences:

• Timing Differences: These happen because you record a transaction at one point, and the bank records it at another. Neither party is wrong; they just haven't caught up with each other yet.
• Errors: These are mistakes made by you in your cash book or by the bank on their statement. These need correcting.

These are super common and usually resolve themselves over time.