What does it mean to reconcile in financial terms?

Reconciling in financial terms refers to the process of matching your bank statement with your checkbook. This practice involves reviewing the records of your transactions as recorded in your checkbook or accounting software against the transactions listed on your bank statement. By doing so, you can identify any discrepancies, such as errors in recording transactions, missed deposits, or unauthorized transactions. The goal of reconciliation is to ensure that your records accurately reflect your financial status and to maintain a clear, accurate understanding of your available funds.

In this context, while planning future budgets, evaluating spending habits, and filing taxes are all important financial activities, they do not specifically define the act of reconciliation, which is focused solely on aligning personal financial records with external financial statements, like those provided by a bank.