Reconciliation is the process of making sure that the record of an accounting cash and bank asset matches up with what it actually is. This is an extremely simple concept that is easier to show with an example rather than with a technical explanation.
Say that you’re running a shoe store and have $12,100 SGD in your OCBC corporate bank account. You make a sale and now have $12,200 SGD in your account.
After noting that transaction in Xero, you should now see Xero tell you that you should have $12,200 SGD in your OCBC account. If you’ve made a careless error with choosing the wrong date or cash account, Xero will obviously only show the previous amount of $12,100 SGD.
By going to your OCBC iBanking account, you can get the balance figure of $12,100 SGD and compare it with what shows up in your Xero account.
By adding it in manually, Xero will give you a thumbs up if that’s correct with what it has. Otherwise, Xero will tell you that there’s been an error with your transaction.