The Reconciliation window is used to reconcile a GnuCash account with a statement that a bank or other institution has sent you.
For example, when you write a check for something, you should enter the transaction into GnuCash. The reconciliation (R) field of the transaction will initially contain n (not reconciled). Later, if you think that the check has been cashed, you might click on the transaction's R field to change it to c (cleared, but not reconciled).
At the end of the month, you receive your bank statement, perhaps including canceled checks. At that point, you should "reconcile" the account, that is, match your personal records with the documentation provided by the bank.
Open the reconcile window by selecting Reconcile... from the Accounts menu of the account's Register window. GnuCash will prompt you for some information from the statement:
Enter the date of the end of the period that the statement covers, and the final balance from the statement, and press OK. The Reconcile window will pop up. It looks like this:
The Funds In and Funds Out groups lists all the unreconciled transactions. The '?' columns show whether the transactions have been cleared or reconciled.
Now, examine each item on the bank statement, and look for the matching item in the Reconcile window.
If you cannot find one, then perhaps you forgot to enter a transaction, or did not know that the transaction had happened. You can use the New button on the tool bar, or the New menu item in the Transaction menu, to open a register window and enter the missing transaction. The new item will appear in the Reconcile window when you press enter after entering the transaction.
When you find the item in the Reconcile window, compare the amount in the item to the amount on the statement. If they disagree, you may have made an error when you entered the transaction in GnuCash. You can use the Edit button on the tool bar, or the Edit menu item in the Transaction menu, to open a register window and correct the transaction.
If the amounts agree, click on the item in the Reconcile window. The '?' column will change to 'y' (reconciled) from 'n' or 'c'.
You then repeat this for each item that appears on the bank statement, verifying that the amounts match with the amounts in GnuCash, and marking off transactions in GnuCash as they are reconciled.
At the bottom of the window is a difference field, which should be $0.00 when you are done reconciling. If it isn't, then you have either missed transactions, or some amounts may be incorrect in GnuCash. (Or, probably rather less likely, the bank may have made an error.)
When you have completed marking off all the items on the bank statement, and when the difference is $0.00, you should press the Finish button on the tool bar or select Finish from the Reconcile menu. The Reconcile window will close. In the Register window, the R field of the reconciled transactions will change to 'y'.