What is reconciliation? Do I have to do it?
Reconciliation is when you check the balance of your accounts in your books to the balance of your accounts on your account statements. If they are not the same, you have work to do.
It must be done.
Most CPAs won’t touch your taxes until your book balances match your statement balances. There is a quick fix that involves making an “adjusting” journal entry to set things right, and if the discrepancy is like $10, that’s probably your best bet. In the end, if you don’t reconcile your books to your statements, you will either be under or over reporting something. There are potential consequences either way: If you under-report your income on your taxes (and you get caught) you face penalties. If you under-report your expenses you end up paying more taxes than you have to. I highly recommend reconciling every account every month to catch, isolate, and resolve errors as soon as possible.
