What is Reconciliation?

Reconciliation is a core accounting process that involves comparing two sets of records to ensure they match and are accurate. The goal is to identify and resolve any discrepancies. The most common type is a bank reconciliation, but the process is also used for accounts receivable, accounts payable, and marketplace payouts.

For Startups: Regular reconciliation is a fundamental financial control. It helps prevent errors, detect fraudulent transactions, and ensures that the company's financial statements are reliable. For an e-commerce startup, reconciling payments from marketplaces like Amazon or Flipkart is a critical and often complex task to ensure all sales and fees are accounted for correctly.

Example: An accountant performs a monthly bank reconciliation, matching every transaction in the company's books to the bank statement to ensure no transactions have been missed or recorded incorrectly.