Reconcile a bank account month by month
Bank reconciliation is about ticking, one by one, the entries that actually appear on the statement until the difference drops to zero, then closing the month. Ledger loads the beginning balance automatically from the previous reconciliation, handles outstanding items that carry over from one fiscal year to the next, and shows the difference instantly as you tick each box.
When to reconcile
Ideally at each month-end, when the bank statement arrives. In practice:
- You imported the statement into Bank transactions.
- You categorized every transaction (otherwise they don't appear in the reconciliation).
- The PDF or paper statement is open beside you, with the month-end balance.
Only classified entries reconcile. If transactions are sitting in “To review”, Ledger warns you: “X unclassified transaction(s) in this period are not shown: only classified entries reconcile. Classify them first, otherwise the balance won't tie.”
Open Reconciliation
Engagement's left menu → BOOKKEEPING → Reconciliation. The page has two tabs: Reconcile (this one) and Reports (the history of closed reconciliations).
Choose the account and date
At the top, select:
- The account to reconcile (for example “1000, Example Bank 4102”).
- The statement end date (last day of the bank period).
- The statement ending balance as shown on the bank's statement.
The beginning balance is locked: it comes from the ending balance of the previous reconciliation. You don't type it, Ledger calculates it. A line “Last reconciliation: {date} · balance {balance}” reminds you where it comes from.
This red message appears when a transaction already reconciled in a closed reconciliation was deleted or changed afterwards. The following months won't balance until it's fixed. Find the affected transaction (often in the previous period's operation entries) and restore it, or undo the most recent reconciliation from the Reports tab and tick the items again.
Tick the transactions that appear on the statement
The table lists every entry that touches this account in the period. Compare each row with the statement and tick the ones that appear on it. Use the Check all button at the top if the statement is short and you want to do everything at once, then untick the few that are missing.
The difference recalculates with every box you tick. The goal: bring it to $0.00.
Under each description, a small grey line shows where the transaction was posted: the other side of its entry, for example → Advances to shareholder · GST · QST. The account being reconciled isn't listed since it's obvious. Click that line to open the full entry (accounts, debits, credits), the same window as in the general ledger; clicking it doesn't tick the transaction.
Read the Transfer and Entry tags
Some rows have a tag next to the description:
- Transfer: a movement that comes from another bank account (through the “Record as transfer” feature in Bank transactions).
- Entry: a movement that touches this account without coming from a bank transaction of this account (for example a manual cheque recorded as an entry, or an adjusting entry).
These derived movements are ticked like the others; they are part of the cleared balance.
Handle prior-year items
A prior-year item is a transaction (typically an outstanding cheque) dated in a fiscal year that is already closed but that was never presented to the bank. It shows up in the current reconciliation with a Prior year badge.
Ticking a prior-year item never touches the frozen year: Ledger records it as “presented” in the current year, while keeping the prior year frozen. That is exactly what you want for these lingering items.
Close the month
When the difference is 0, click Close the month. Ledger saves the reconciliation as a “report” in the Reports tab:
- Ticked items are locked as reconciled.
- The ending balance of this reconciliation becomes the (locked) beginning balance of the next one.
- A printable report is available from the Reports tab (Summary, date, totals, detail of everything that was ticked). Transfers, entries and prior-year items appear in it with their tag, alongside the bank transactions: the beginning balance plus the detail gives exactly the cleared balance. The counterpart (where each transaction was classified) stays on screen only; it isn't printed.
Reports tab, the history
Each closed reconciliation appears there with its date, the account, the number of transactions, and a Report button to open the PDF. Useful for an audit, or to check what was done last month.
An All accounts filter at the top shows the history for every account; otherwise each account card has its own history.
The most recent reconciliation of each account also carries an Undo button. After you confirm, the reconciliation is deleted: its transactions become uncleared again and you can redo the month. Only the last reconciliation of an account can be undone, because the months are chained (one month's ending balance becomes the next month's locked beginning balance); to go further back, undo the months one at a time, from the most recent to the oldest.
When the difference won't drop to zero
A few common causes, in order of likelihood:
- A transaction is missing in Ledger: it's on the statement but not in the list. Re-import the statement, or add it manually through Bank transactions.
- A transaction is extra: it's ticked but isn't on the statement (already classified by mistake, or duplicated). Untick it and check whether it should be deleted.
- The ending balance was entered incorrectly: re-read the statement, a transposed digit happens quickly.
- A transaction is classified in the wrong account (for example a credit card transaction that landed on the bank account). Fix it in Bank transactions, then come back.
- An outstanding cheque is missing: that's normal, it isn't ticked this month and stays in the next period. The difference has to take its amount into account.
Cross-year carryover, bounded by the last reconciliation
When a client has transactions that span several fiscal years (monthly automatic payments, recurring withdrawals), Ledger limits the carryover of outstanding items to the last closed reconciliation, not to every unticked transaction from the previous year. Otherwise the recurring payments would show up as false duplicates in the current period.
Frequently asked questions
Can I reconcile several months at once?
Technically yes, by setting the statement end date to the last month's date. But it isn't recommended: each closed month is the anchor point for the next one. Reconciling month by month isolates errors; a quarterly reconciliation mixes them together.
A reconciliation was closed by mistake. How do I redo it?
In the Reports tab, click Undo on the account's most recent reconciliation, then confirm. Its transactions become uncleared again and you redo the month as usual. To correct an older month, undo the reconciliations one at a time, working backwards: Ledger never undoes a month in the middle, since that would break the beginning balance of the following months.
The card had no transactions this month (zero balance). Can I still reconcile it?
Yes. Enter the statement end date and its ending balance (often 0) without ticking anything: the difference is zero and the Close the month button becomes active. The record documents that the month was checked and keeps the chain of balances continuous for the following months. An account that was reconciled in the past also stays in the dropdown even if it has no transactions this year.
Can reconciliation be used for credit card accounts?
Yes, exactly as for a bank account. Select the credit card account in the dropdown; the logic is the same: tick the transactions on the statement, aim for a difference of zero, close the cycle. Only the wording changes: on a card, the balance is the amount owed, and the Cleared receipts box becomes Cleared purchases (purchases increase the balance, payments decrease it).
No entries to reconcile, empty page
Two possible causes: (a) no transactions were imported for this account for this period (import the statement in Bank transactions), or (b) all the transactions are still in To review (categorize them first).