"Please show steps of how to set up such an account"
Add a New bank account and name it Cash On Hand or Petty Cash, if you don't already have one.
"and the steps showing how to reconcile it/the two accounts."
You Count the cash on hand; that is the value you use to Reconcile to, for cash on hand. If that isn't what you see in the accounting data, someone forgot to make entries, to leave receipts, to return change, etc.