All 26 Bank Reconciliation questions
More in Bank Reconciliation
What is a standing order? What is a credit transfer (bank giro) received? What documents are needed to perform a bank reconciliation? What does 'reconciling item' mean? Which differences require an adjustment to the cash book and which do not? How does a bank reconciliation help detect fraud or error? What causes a bank reconciliation not to balance and how do you investigate? How do bank errors feature in a reconciliation? How do you reconcile when starting from the cash book balance instead of the statement? What is the correct order: update the cash book first or reconcile the statement first?
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Bookkeeping › Bank Reconciliation

What are the steps to prepare a bank reconciliation?

Intermediate

Answer

First, update the cash book for items on the bank statement not yet recorded (charges, interest, direct debits, standing orders, dishonoured cheques) and correct any cash book errors, giving an adjusted cash book balance. Then, starting from the bank statement balance, adjust for timing differences—add outstanding lodgements and deduct unpresented cheques—to arrive at the adjusted cash book balance.
Bank statement balance          5,200
  Add: outstanding lodgements    +400
  Less: unpresented cheques      -600
  = Adjusted cash book balance   5,000
Real-world example The bookkeeper first updates the cash book for bank charges, then reconciles the statement for timing differences.

Common follow-ups: Which items update the cash book? | Which are timing differences on the statement?

Cash Book & Petty Cash Correcting Errors Bank Reconciliation
All 26 Bank Reconciliation questions