What is a book balance?

A book balance is the account balance in a company's accounting records. The term is most commonly applied to the balance in a company's checking account at the end of an accounting period. The company uses the bank reconciliation procedure to compare its book balance to the ending cash balance in the bank statement provided to it by the company's bank.

The bank and book balances are almost never the same, and may call for the adjustment of the book balance. The following reconciling items commonly arise as part of a bank reconciliation, and require the adjustment of the book balance:

• Interest earned. This amount is recorded in the bank statement, and must be added to the company's book balance.
• Service charges. These amounts are charged by the bank for its services in maintaining the checking account, and must be added to the company's book balance.
• Adjustments to deposits. The company may sometimes record a deposit incorrectly, or it may deposit a check for which there are not sufficient funds. If so, and the bank spots the error, the company must adjust its book balance to correct the error.
• Adjustments to checks. The company may occasionally record a check incorrectly. If so, and the bank spots the error, the company must adjust its book balance to correct the error.

Related Terms

Bank reconciliation procedure
What is a bank balance?
What is a bank statement?
What is a deposit in transit?
What is an unpresented check?