How to Reconcile a Bank Statement: Steps and Example
Bank reconciliation in six steps, with a worked example: match transactions, list timing differences, fix errors, and tie the adjusted balances.
To reconcile a bank statement, compare every transaction on the statement with your cash ledger for the same period, then adjust both sides for items only one side has recorded. The bank balance is adjusted for deposits in transit and outstanding checks, and the book balance is adjusted for bank fees, interest, and errors. When the two adjusted balances are equal, the account is reconciled.
The bank reconciliation formula
| Bank side | Book side |
|---|---|
| Ending balance per bank statement | Ending balance per general ledger |
| + Deposits in transit | + Interest and other credits only the bank has recorded |
| - Outstanding checks | - Bank fees, NSF and returned items |
| +/- Bank errors | +/- Book errors |
| = Adjusted bank balance | = Adjusted book balance |
The two totals must be equal. Anything left over is an item you have not found yet.
This guide is for accountants and bookkeepers closing the month. It covers the difference between a statement and a reconciliation, the six steps, a worked example, and the problems that cause reconciliations to fail.
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Bank statement vs bank reconciliation
The two are often confused, but they are different documents produced by different people:
| Bank statement | Bank reconciliation | |
|---|---|---|
| Prepared by | The bank | You or your accountant |
| Shows | The bank's record of the account for a period | Why the bank's balance and your book balance differ |
| Starts from | Opening balance per bank | Closing balance per bank and per books |
| Ends with | Closing balance per bank | Two adjusted balances that match |
| Purpose | Report activity to the account holder | Prove the books are complete and correct |
The statement is an input. The reconciliation is the control. For the parts of the statement itself, see how to read a bank statement.
Why reconcile every month
- Catch errors. Duplicate entries, transposed digits, and transactions posted to the wrong account show up as differences.
- Find missing activity. Bank fees, interest, and automatic payments are often recorded only when someone sees them on the statement.
- Detect fraud early. Unauthorized withdrawals stand out when every line has to be matched. For consumer accounts, Regulation E gives 60 days after the statement is sent to report electronic transfer errors, so a late reconciliation can cost rights.
- Close with confidence. Financial statements, tax returns, and lender reports all depend on an accurate cash balance.
How to reconcile a bank statement in 6 steps
- Gather the records. Get the bank statement for the period, your general ledger cash account, and last month's reconciliation with its list of outstanding items.
- Check the statement itself. Confirm the statement's opening balance matches last month's closing balance and that opening balance plus deposits minus withdrawals equals the printed closing balance. A statement that does not add up on its own is incomplete or misread.
- Match transactions. Tick off every deposit and withdrawal that appears in both the bank statement and the ledger, by amount and date. Start with last month's outstanding items, which should clear this month.
- List the differences. Unmatched items on the bank side are usually fees, interest, or bank errors. Unmatched items on the book side are usually deposits in transit, outstanding checks, or recording errors.
- Calculate the adjusted balances. Adjust the bank balance for deposits in transit and outstanding checks, and adjust the book balance for bank-only items and corrections. The two must match.
- Post entries and document. Record journal entries for book-side adjustments, then save the reconciliation report with the statement and a reviewer sign-off.
Worked example
The figures below are invented for illustration.
Per bank statement, September 30: $18,450.00 Per general ledger, September 30: $16,912.50
Differences found when matching:
- Deposit of $2,300.00 recorded on September 30, not yet on the statement (deposit in transit).
- Check #1047 for $3,900.00 written September 28, not yet cleared (outstanding check).
- Monthly service fee of $25.00 on the statement, not in the books.
- Interest of $12.50 on the statement, not in the books.
- A $450.00 vendor payment entered in the books as $540.00 (transposition error, books understated by $90.00).
| Bank side | Amount | Book side | Amount |
|---|---|---|---|
| Balance per bank | 18,450.00 | Balance per books | 16,912.50 |
| Add deposit in transit | 2,300.00 | Add interest earned | 12.50 |
| Less outstanding check #1047 | (3,900.00) | Less service fee | (25.00) |
| Add correction of payment error | 90.00 | ||
| Adjusted bank balance | 16,850.00 | Adjusted book balance | 16,990.00 |
The balances differ by $140.00, so the reconciliation is not done. Re-checking the ledger turns up a $140.00 customer deposit recorded twice. Reversing the duplicate brings the adjusted book balance to $16,850.00, and the account reconciles.
Journal entries for the book side: record the $25.00 fee, the $12.50 interest, the $90.00 correction, and the reversal of the duplicate $140.00 deposit. The deposit in transit and the outstanding check need no entry; they should clear on next month's statement.
Put it into practice
Reconciliation errors start in extraction
Split rows, missed transactions, and rounded figures compound over time. Structured extraction with built-in validation gives you a reconciled result from the first pass.
Bank reconciliation template
Use this layout for every account, every month. Fill it in from the statement and the ledger, and keep it with the statement as the record of the close.
| Line | Bank side | Book side |
|---|---|---|
| Account, period end | Checking ...4821, September 30 | Cash - Operating, September 30 |
| Ending balance | Per statement | Per general ledger |
| Add | Deposits in transit (list each) | Interest, bank credits not yet booked |
| Less | Outstanding checks (number, date, amount) | Bank fees, NSF and returned items |
| Corrections | Bank errors, with the bank's reference | Book errors, with the entry corrected |
| Adjusted balance | Must equal the book side | Must equal the bank side |
| Sign-off | Prepared by, date | Reviewed by, date |
Carry the outstanding items forward. Next month, start by ticking off last month's deposits in transit and outstanding checks; anything still open after 60 to 90 days needs a follow-up, not another carry-forward.
Grouped, netted and reversed items
Most reconciliations that refuse to balance are not missing a transaction. The bank and the books recorded the same activity in a different shape. The usual cases:
| What the statement shows | What the books show | How to match it |
|---|---|---|
| One line for several cleared checks | Each check separately | Total the checks in the ledger and tick them off as a group against the bank line |
| One deposit for several customer payments | Each receipt separately | Match the deposit slip or batch total, not the individual receipts |
| Card or payment-processor deposit, net of fees | Gross sales | Book the gross sale and the processing fee as separate lines so the net equals the deposit |
| Returned deposit or NSF item, plus a fee | The original deposit only | Reverse the deposit in the books and record the fee |
| Bank correction (a debit and a matching credit) | Nothing | No entry needed; tick both lines off against each other |
| Transfer between two of the client's accounts | One side only | Record both legs, so each account's reconciliation sees its half |
On credit card accounts the same method applies with the signs reversed: purchases increase the balance owed, payments reduce it, and the statement closing balance is what you reconcile the liability account to.
Why reconciliations fail, and how to fix them
| Symptom | Likely cause | What to check |
|---|---|---|
| Difference divisible by 9 | Transposed digits | Amounts with swapped digits, like 540 vs 450 |
| Difference equals one transaction | Missing or duplicate entry | Search the ledger and statement for that amount |
| Difference is twice one transaction | Debit recorded as credit | Sign of that entry |
| Opening balance does not match last month | Prior reconciliation was changed or wrong | Entries posted to a closed period |
| Statement does not add up on its own | Missing pages or misread figures | Page count and printed totals |
Outstanding checks older than a few months should be investigated rather than carried forever. Depending on the state, long-uncashed checks may eventually have to be reported as unclaimed property.
Reconciling client accounts at volume
The logic of a reconciliation is the easy part. The slow part is getting a year of PDF statements, often for several accounts per client, into a form you can match against the ledger, and knowing the statement data is complete before you start.
That is the step DocuClipper takes off your desk. Upload the statements, and every transaction comes back in Excel, CSV or a QuickBooks-ready file, with each statement already checked against its own printed opening and closing balances. A statement whose transactions do not add up to the bank's own totals is flagged, so you fix the input before you spend an hour chasing a difference that was never in the books. More than 115,000 statements a month go through that check.
- Matching in QuickBooks: bank statements to QuickBooks
- Matching in a spreadsheet: bank statements to Excel
- How the balance check works: statement reconciliation and how reconciliation works
Clean, consistently categorized transactions also make matching faster. See the transaction categorization guide.
FAQ
What is a bank reconciliation?
A bank reconciliation is a comparison of the bank statement balance with the cash balance in your books at the same date. It lists the items that explain the difference, such as deposits in transit, outstanding checks, and bank fees, until both adjusted balances agree.
What is the difference between a bank statement and a bank reconciliation?
The bank prepares the statement to report account activity. You prepare the reconciliation to prove that your books agree with the bank after timing differences and corrections.
How often should you reconcile a bank statement?
Monthly at a minimum, as soon as the statement is available and before you close the month. High-volume accounts are often reconciled weekly or daily.
What if my bank reconciliation does not balance?
Check whether the difference is divisible by 9 (transposition), equals a single transaction (missing or duplicate), or equals twice a transaction (wrong sign). Confirm the opening balance matches last month's reconciliation and that the statement is complete.
Do outstanding checks need a journal entry?
No. Outstanding checks and deposits in transit are timing differences on the bank side. Only items that change your books, such as fees, interest, and corrections, need journal entries.
What is the bank reconciliation formula?
Adjusted bank balance = ending balance per bank + deposits in transit - outstanding checks +/- bank errors. Adjusted book balance = ending balance per books + interest and other bank credits - bank fees and NSF items +/- book errors. The account is reconciled when the two adjusted balances are equal.
How do I reconcile when the bank groups several checks or deposits into one line?
Match the group, not the individual items. Add up the checks or deposits in your ledger that make up the bank's single line, and tick them off together when the total equals the bank amount. For card and payment-processor deposits, record the gross sales and the processing fee separately so the net deposit matches the statement.
Written by the DocuClipper editorial team. Last updated November 2, 2026.
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