What it means
Differences usually come from timing, such as a deposit in transit or an outstanding check, or from items the books do not yet show, such as bank fees, interest or data entry errors. The result is a short statement that lists these items and ends with one adjusted balance. It differs from a general ledger review, which checks every account, because reconciliation looks only at cash and the bank's record of it.
Why it matters when you buy software
In accounting software, the bank feed and the matching rules decide how much of the work stays manual. When you compare tools, look at whether the plan includes automatic bank feeds, rule-based matching, support for several bank accounts and a clear record of who approved each reconciliation. Limits on feeds or accounts can sit in higher plan tiers.
How it works in practice
The software imports bank transactions, suggests matches against recorded entries and leaves unmatched items for a person to review. Once every item is matched or explained, the user marks the period as reconciled, usually each month. A locked period then protects the figures from later edits.
See also: Accounts payable, Accounts receivable and the glossary index.