Account Reconcilement

Account reconcilement is the process of confirming that two separate records of transactions in an account are equal. Both institutions and individuals perform account reconcilement. At the institutional level, banks and brokers must internally review transactions between their general ledger entries and individual account records.

Reconcilement also occurs when a customer of a bank or broker confirms that his or her personal records match what is reported on periodic statements. At the individual level, balancing a checkbook is a form of account reconcilement. The term can also refer to balancing the books and records of a business with software programs and data entries.

For larger institutions, outside third parties are often contracted to conduct account reconcilement, which provides a level of objectivity to the review. Account reconcilement within financial institutions is a key regulatory and compliance function, and it is a primary focus for outside regulators in their routine audits of the firm. Customers of these firms should also keep an accurate record and report discrepancies promptly. With the advent of computer systems to record transactions and client positions, reconciling often amounts to fixing small discrepancies of a few dollars, or even pennies, between one source and another. The longer an error goes uncovered, the more difficult it will be to reconcile the two records.