--- title: "Bank Reconciliation: How to Do It and What It Catches" url: https://www.everstonecpa.com/blog/bank-reconciliation-why-it-matters description: "How a bank reconciliation is performed, what a difference between the ledger and the statement usually means. See why an unreconciled year-end costs more." type: guide updated: 2026-10-12 summary: "Bank reconciliation proves that the cash balance in a set of books agrees to the bank statement, and that every difference is explained. It catches duplicated income, missing transactions, timing errors and misposted amounts — the errors that otherwise surface only when a corporate return is prepared or reviewed." faq_count: 6 publisher: EverStone CPA Inc., a Chartered Professional Accountant firm registered with CPA British Columbia and CPA Alberta service_area: British Columbia, Alberta, Ontario and Manitoba language: en-CA contact: info@everstonecpa.com · https://www.everstonecpa.com/book-online --- [Home](https://www.everstonecpa.com/) [Blog](https://www.everstonecpa.com/blog) Bank reconciliation: what it catches and what skipping it costs Bookkeeping # Bank reconciliation *— what it catches, and what a skipped year costs* By EverStone CPA · Reviewed July 2026 · 8 min read Reconciling is the least glamorous bookkeeping task and does the most work. Busy owners drop it first, assuming the bank feed imported everything. That is how unreconciled years happen, and an [unreconciled year](https://www.everstonecpa.com/catch-up-bookkeeping) is an expensive thing to hand a CPA in Canada. **Quick answer:** Bank reconciliation proves that the cash balance in a set of books agrees to the bank statement, and that every difference is explained. It catches duplicated income, missing transactions, timing errors and misposted amounts — the errors that otherwise surface only when a corporate return is prepared or reviewed. A bank feed imports transactions. It does not prove the balance. ## Key takeaways - A bank feed imports transactions; it does not prove the balance is right. - Duplicated deposits overstate revenue and the corporate tax that follows it. - Unreconciled books mean unsupported [GST/HST returns](https://www.everstonecpa.com/gst-hst-filing-services) and unsupported payroll remittances. - A CRA reviewer starts from the statements, so the reconciliation is what the file rests on. ## What bank reconciliation actually is Reconciling is not clicking “match” on a bank feed. It is a proof. You take the closing balance the bank says you had, you take the closing balance your books say you had, and you explain every dollar of difference with items that legitimately exist, a cheque issued but not yet cashed, a deposit in transit, a card charge posted after the cut-off. If anything is left over that you cannot name, the books are wrong and you have found it while it is still small. The feed is a convenience, not a control. It can drop transactions in an outage, import a day twice after a reset, and miss anything outside that account: a cheque paid personally, cash taken from a job, a transfer between company accounts recorded once. **Rather not reconcile the accounts yourself?** We reconcile every bank, card and loan account each month, from $325 a month. [Get a bookkeeping quote](https://www.everstonecpa.com/book-online?service=monthly#enquiry-form). [Get My Fixed Quote](https://www.everstonecpa.com/book-online?service=monthly#enquiry-form) ## What it catches in real Canadian books **Duplicated income.** The most expensive error, because it flows straight through to tax. A deposit that lands twice inflates revenue, and the corporation pays tax on money it never received. Nothing in the books flags it; only the bank balance does. **Missing expenses.** The reverse, and it costs the deduction. A charge that never imported is a deduction never claimed, and because it makes the balance look better, nobody investigates. **Transfers recorded once.** Moving money between the operating account and a savings or tax-reserve account should have two entries. Recorded once, it becomes phantom revenue or a phantom expense. **Sales tax on the wrong side.** If a deposit is coded to revenue without splitting out the GST/HST collected, your [input tax credits and tax collected](https://www.everstonecpa.com/blog/input-tax-credits-itc-canada-guide) stop tying to the bank, and the return you file is a guess. **Payments that never cleared.** An uncashed supplier cheque or CRA remittance shows only as a stale reconciling item. Find uncleared source deductions early; trust-fund arrears are treated far more seriously than ordinary debt. Not sure how this applies to you? Every corporation’s situation is different. Send an enquiry to a CPA and get a straight answer for your own books. [Send an Enquiry →](https://www.everstonecpa.com/book-online?service=monthly#enquiry-form) [Bookkeeping & year-end](https://www.everstonecpa.com/accounting-services) ## Why the corporate angle changes the stakes For a sole proprietor, unreconciled books mostly mean an inaccurate [T2125](https://www.everstonecpa.com/self-employed-tax-return). For an incorporated owner, the same problem propagates. The bank balance feeds the balance sheet, which feeds Schedule 100 of the T2. The revenue figure feeds Schedule 125 and the small business deduction calculation. The [shareholder loan](https://www.everstonecpa.com/blog/shareholder-loans-canada-taking-money-out-of-corporation) account — the one that determines whether money you took out has to be included in your personal income — is only reliable if every personal transaction that ran through the company account has been identified. Reconciliation is how they get identified. Owners running the software themselves without a CPA behind it will recognize the situation in [QuickBooks but no accountant](https://www.everstonecpa.com/quickbooks-but-no-accountant). Unreconciled books also break the link between the corporate return and your personal one. If dividends declared do not agree to what actually left the bank, the T5 slips and the T2 stop telling the same story, and that inconsistency is visible to the CRA without any audit at all. ## What a CRA reviewer asks for When the [CRA reviews](https://www.everstonecpa.com/cra-review-and-audit-support) a small business, it rarely asks for your books. It asks for bank statements, invoices and support for particular amounts, and works inward from those records. The CRA requires records supported by source documents and capable of verification. Reconciled books meet that; unreconciled books are a claim. This is also why the reconciliation should be saved, not just performed. Keep the month-end statement, the reconciliation report and the list of outstanding items with your [retained records](https://www.everstonecpa.com/blog/cra-record-retention-how-long-to-keep-records), so the proof still exists years later when someone asks. If a letter does arrive, the guide to a [pre-assessment review](https://www.everstonecpa.com/blog/cra-pre-assessment-review-what-to-send) covers what to send. ## What an unreconciled year actually costs Three costs, only one of them a fee. Reconstruction: twelve months reconciled at once, from memory and archived statements, takes far longer than twelve monthly reconciliations. Tax paid on errors: duplicated deposits and missed expenses stay in the return unless found, and after filing, fixing them takes an adjustment. Decisions: you steered all year by numbers that were not true. A fourth cost comes later: never-reconciled books have no clean starting point, so the first reconciled year opens on a balance nobody can prove. That is why [catch-up work](https://www.everstonecpa.com/behind-on-bookkeeping) usually reconciles backwards to the last correct balance. ## A workable monthly routine Once the statement closes, reconcile every account the business touches — each bank account, credit card and payment processor. Confirm the closing balance agrees. List outstanding items and check that last month’s have cleared; anything still there after two months is usually an error. Review anything uncategorized before closing the period. Done monthly it takes little time, and it is the backbone of a proper [month-end close](https://www.everstonecpa.com/blog/month-end-close-checklist-small-business). Sources - [Canada Revenue Agency — Keeping records](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/keeping-records.html) - [Canada Revenue Agency — RC4188 What you should know about audits](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4188/what-you-should-know-about-audits.html) - [Canada Revenue Agency — T4012 T2 Corporation Income Tax Guide](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4012.html) This article is general information for Canadian business owners and is current as of July 2026. It is not tax, legal or accounting advice, and it does not create a client relationship. Tax rules change and your situation is unique, so please [speak with a CPA](https://www.everstonecpa.com/book-online?service=monthly#enquiry-form) before acting on anything here. About this article **EverStone CPA** Prepared and reviewed by a CPA at EverStone CPA, serving businesses in BC, Alberta, Ontario and Manitoba. [About the firm →](https://www.everstonecpa.com/about) · [Send an enquiry →](https://www.everstonecpa.com/book-online?service=monthly#enquiry-form) ### Keep reading [A month-end close checklist →](https://www.everstonecpa.com/blog/month-end-close-checklist-small-business) [Designing a chart of accounts →](https://www.everstonecpa.com/blog/chart-of-accounts-small-business-canada) [CRA reviews and audits →](https://www.everstonecpa.com/blog/cra-review-audit-small-business) ## Who does this for an Abbotsford business In most owner-run businesses the bookkeeper reconciles monthly, before the GST return. [Abbotsford bookkeepers](https://www.everstonecpa.com/bookkeeping-abbotsford) at EverStone reconcile every account monthly within the fixed fee, so year-end starts from books that tie. Common questions ## Frequently asked questions **What is a bank reconciliation?** It is a proof that the cash balance in your books agrees to the bank’s closing balance, with every difference explained by a legitimate timing item such as an uncashed cheque or a deposit in transit. If a difference cannot be explained, the books contain an error and the reconciliation has found it. **Doesn’t the bank feed do this automatically?** No. A bank feed imports transactions, which is a different job. Feeds can miss transactions during an outage, import the same period twice after a reconnection, and they know nothing about business activity that ran through a personal account or a second company account. Only reconciling to the statement balance proves the result. **How often should a corporation reconcile?** Monthly, once each statement closes, for every bank account, credit card and payment processor the business uses. Monthly reconciliation keeps errors small enough to fix from memory and keeps interim numbers trustworthy enough to make decisions on. Quarterly is workable for a very low-volume company; annually is where problems accumulate. **What happens at year end if the books were never reconciled?** The reconciliation has to be done anyway, all at once, from archived statements and without the context you had at the time. Any duplicated income sits in the return as taxable revenue and any missing expense sits outside it as a lost deduction unless the process finds them, so the work is both slower and higher-stakes than doing it monthly would have been. **What does the CRA ask for if it reviews my business?** Typically bank statements, invoices and supporting documents for specific amounts rather than the bookkeeping file itself. The CRA works inward from source records, so your position rests on your books agreeing to those records. Keeping the month-end statement and reconciliation report with your records means the proof still exists when it is asked for. **What if my reconciliation is out by a small amount?** Find it rather than forcing it. A plug entry to make the balance agree hides the underlying error and carries it into the next period and into the T2 balance sheet. Common causes are a transfer between company accounts recorded once instead of twice, a transaction entered on the wrong date, or two transactions of the same value where one was matched twice. ## Books not reconciled? Tell us how many accounts you have and your software. A CPA replies by email within one business day with a fixed monthly fee. [Get My Fixed Quote](https://www.everstonecpa.com/book-online?service=monthly#enquiry-form)[Book a Paid Advice Call](https://www.everstonecpa.com/advice-call) ## Have a question about this? Ask free through [the quick-question form](https://www.everstonecpa.com/quick-question); a CPA replies within one business day. Need more? A 45-minute **Advice Call** is $225 plus GST, credited to your first invoice if you become a client within 60 days. Want us to take it on? [Send an enquiry](https://www.everstonecpa.com/book-online?service=monthly#enquiry-form). Reconciling the bank is the start. A controller engagement means [reconciling every balance sheet account](https://www.everstonecpa.com/contract-cfo), which is where the surprises actually hide. [Ask a Free Question](https://www.everstonecpa.com/quick-question) [Book a Paid Advice Call](https://www.everstonecpa.com/advice-call) Email info@everstonecpa.com ★★★★★ “Personal. Professional. Responsive. Plus he saved me a bundle!” Corrin Skalbeck · Google Local Guide **Run your own numbers with the free calculators:** [check your GST/HST math](https://www.everstonecpa.com/gst-hst-calculator) · [run the incorporate-or-not numbers](https://www.everstonecpa.com/incorporation-calculator) · [Payroll deduction calculator](https://www.everstonecpa.com/payroll-deduction-calculator) [← Associated corporations: sharing one small business deduction](https://www.everstonecpa.com/blog/associated-corporations-small-business-deduction) [Bare trusts in Canada: the arrangement and the filing question →](https://www.everstonecpa.com/blog/bare-trust-reporting-canada) --- Source: https://www.everstonecpa.com/blog/bank-reconciliation-why-it-matters Prices: https://www.everstonecpa.com/pricing · Contact: info@everstonecpa.com · https://www.everstonecpa.com/book-online