What is a Reconciling Item?

A reconciling item is a difference between balances from two sources that are being compared. These items are stated in an account reconciliation, so that the balance from one source is adjusted by reconciling items to arrive at the balance from the other source. Some reconciling items may require adjustment to the records of the recording entity, such as an uncashed check fee that has been imposed by the entity's bank.

Characteristics of a Reconciling Item

The key characteristics of a reconciling item are as follows:

Temporary in nature. Most reconciling items are temporary and will be resolved in future periods. For example, a deposit in transit will clear once the bank processes it.
Impact on balances. Reconciling items directly impact the accuracy of the ending balances in both sets of records.
May require an adjustment. Some reconciling items require adjusting entries to align the two sets of records. An example is bank fees recorded by the bank but not yet recorded in the company books.

Examples of Reconciling Items

The following are frequently found to be reconciling items on a bank reconciliation; they should all be investigated as part of the reconciliation process, and may result in account corrections by the company or its bank:

Bank service charges. These are fees charged by an entity’s bank, such as check processing fees, that have not yet been recorded by the firm in its accounting records.
Deposits in transit. These are checks and cash recorded by a business as having been received, but which have not yet been recorded by its bank as being received into the firm’s bank account.
Interest income. This is income credited to a company’s account by its bank, based on the cash balance in its account, which the company has not yet recorded.
Outstanding checks. These are checks that have been issued by a business, but which have not yet been presented to its bank by the payees.
Not sufficient funds checks. These are checks deposited by the company to its account, which the bank has rejected due to a lack of funds in the payers’ accounts.

Either the company or its bank may also make recordkeeping mistakes that become reconciling items, such as recording a check receipt with one too many zeros.