Bank account reconciliation
Last reviewed 2026-09-18
A bank reconciliation compares the cash balance in the general ledger with the closing balance on the bank statement at the same date, and explains the gap. It is the most tractable reconciliation in accounting, because the evidence is genuinely independent and arrives on a schedule.
The two directions of difference
Every reconciling item is either something the ledger knows and the bank does not yet, or something the bank knows and the ledger does not yet.
| In the ledger, not yet at the bank | At the bank, not yet in the ledger |
|---|---|
| Cheques written and not presented | Bank charges and interest |
| Receipts banked after the last clearing | Direct debits taken |
| Transfers initiated late in the day | Dishonoured cheques returned |
| Receipts collected directly by the bank |
The left column is timing and resolves itself. The right column is generally not timing — it is the ledger being behind, and each item becomes a journal. Confusing the two is the most common error on this reconciliation: a bank charge treated as an outstanding item rolls forward forever, because nothing is ever going to clear it.
Worked example
| Line | Amount |
|---|---|
| Balance per bank statement, 30 Sep | 418,204.00 |
| Less: unpresented cheques (6 items, payment run 27 Sep) | (9,431.00) |
| Add: deposit in transit (banked 30 Sep, credited 1 Oct) | 4,107.00 |
| Adjusted bank balance | 412,880.00 |
| Balance per general ledger, before adjustment | 414,155.00 |
| Less: bank charges, Sep | (275.00) |
| Less: direct debit, insurance, not posted | (1,000.00) |
| Adjusted ledger balance | 412,880.00 |
| Difference | 0.00 |
The two adjustments to the ledger side are journals to post, dated in September. The two adjustments to the bank side are not journals and must never be posted — they are already in the ledger and will appear on the October statement. A reconciliation that posts a journal for an unpresented cheque removes the payment twice.
The outstanding items section, read properly
Outstanding transactions are the items in flight at the cut-off. Read as a list they are administrative. Read as an age profile they are diagnostic:
- An unpresented cheque more than about six months old is usually not outstanding at all. It was lost, voided outside the system, or sent to a payee who no longer exists. It needs writing back, not carrying.
- A deposit in transit still in transit after a few days is not timing. Something did not arrive.
- An outstanding item that reappears each month with a slightly different amount is two errors partially offsetting, not one item.
What a clean bank reconciliation proves
It proves the ledger cash balance agrees with an independent record of the same balance. It does not prove the payments in it were authorised: a fraudulent payment that cleared appears on both sides and reconciles perfectly. Authorisation is a separate control, and a bank reconciliation is routinely relied on as though it covered both.
It also does not prove completeness of receipts. A customer payment diverted before it reached the account is absent from both the bank statement and the ledger, and the reconciliation is silent. That gap is closed by tying receipts to the receivables subledger and to what customers say they paid — evidence from a third place.
Common questions
- What is a bank reconciliation account?
- The phrase is used two ways. Usually it means the general ledger cash account being reconciled to the bank statement. In ERP systems with a reconciliation-account concept it can also mean a control account carrying a subledger total, which is a different idea that happens to share the word.
- Should bank charges be treated as outstanding items?
- No. An outstanding item is something that will clear on its own. A bank charge has already happened at the bank and is simply missing from the ledger, so it is a journal to post in the period. Treating it as outstanding leaves it on the reconciliation permanently.
- How often should a bank account be reconciled?
- Monthly at minimum and daily for high-volume operating accounts. Daily reconciliation is less about the close than about detection time: the difference between finding an unauthorised payment in one day and in thirty is usually the difference between recovering the money and writing it off.
About Valcenra
Valcenra decomposes a financial movement into drivers that tie to the underlying records, keeps rounding, unmatched and unexplained residuals apart rather than summing them, and refuses to state a conclusion it cannot support — naming the field it needs and the conclusion that field decides. It is read-only: it drafts and computes, and it does not post journals, move money or approve anything. Talk to us.