term used when settling differences contained in the BANK STATEMENT and the cash account in the books of the bank's customer. Rarely do the ending balances agree. To reflect the reconciling items, a bank reconciliation is required. Once completed, the adjusted bank balance must prove to the adjusted book balance. When it does, it indicates that both records are correct. Journal entries are then prepared to update the records and to arrive at an ending balance in the cash account that agrees with the ending balance in the bank statement. The bank balance is adjusted for items reflected on the books that are not on the statement. They include OUTSTANDING CHECKS, DEPOSITS IN TRANSIT, and bank errors  in charging or crediting the company's account.The book balance is adjusted for items shown on the bank statement that are not reflected on the books. They include bank charges, not-sufficient funds checks, collections made by bank on the customer's behalf (e.g., collected notes receivable), interest earned, and errors on the books.