What does it mean to "reconcile" an account?

Reconciling an account involves the process of ensuring that two sets of records, such as the financial records maintained by an individual or business and the bank's records, are in agreement. This is crucial for accurate financial management, as it verifies the correctness of transactions recorded in personal books against the statements provided by a financial institution. By comparing these records, discrepancies can be identified and corrected, ensuring that all transactions are accounted for and that the account balances are accurate.

This practice is significant in maintaining financial integrity, aiding in budgeting, and preventing fraud or errors. Successful reconciliation leads to a clear understanding of one’s financial position, which is a key principle in financial counseling and management.