When two answers differ, the quickest fix is to start from the gap, not from scratch. Work out the difference, then find the item or items that explain it, and the route that missed them is the one to correct.
This lesson uses a bank reconciliation because it naturally has two starting points. It builds on bank reconciliation and on the adjustment trail from the previous lesson.
Why do two correct routes end at the same figure?
The cash book and the bank statement are two records of the same money. They disagree for two reasons. Some items are in one record but not yet in the other, and some are timing differences that will correct themselves.
After you apply every item to the right record, both routes land on one figure: the true bank balance. That shared figure is the check on your work.
How to reconcile two answers, step by step
- Write both final answers and find the difference between them.
- List every item from the question and label it: “missing from the cash book” or “timing difference”.
- Update the cash book with the missing items only, using the correct sign. Money out reduces the balance.
- Starting from the bank statement, apply the timing items to reach the adjusted balance.
- Compare the two adjusted balances. If they match, the work is complete.
- If they do not match, test the leftover gap against item values, half of item values and items you may have used twice.
Worked example
Kedai Buku Seri has a cash book balance of RM5,760 (money in the bank). The bank statement shows RM5,480. The following items are found.
- Bank charges of RM45 are on the statement but not in the cash book.
- A direct debit of RM120 for insurance is on the statement but not in the cash book.
- A customer paid RM275 directly into the bank. It is on the statement but not in the cash book.
- A lodgement of RM1,150 was made on the last day and is not yet on the statement.
- Cheques of RM760 have been issued but not yet presented.
Route A, from the cash book. Only the three missing items change the cash book.
5,760 − 45 − 120 + 275 = RM5,870
Route B, from the bank statement. Apply the two timing items.
5,480 + 1,150 − 760 = RM5,870
Both routes reach RM5,870, so the reconciliation holds.
Check the gap between the starting figures: 5,760 − 5,480 = 280. The net of the two timing items is 1,150 − 760 = 390, and the net of the cash book items is 275 − 45 − 120 = 110. Then 390 − 110 = 280, which matches.
The mistake to watch for
A student who starts from the bank statement may apply the cash book items to it.
Mistaken Route B: 5,480 − 45 − 120 + 275 + 1,150 − 760 = 5,980.
Bank charges, the direct debit and the customer’s payment are already inside the statement balance. They must not be applied again.
The correction is a rule of thumb: items on the statement are never applied to the statement. Missing items change the cash book. Timing items change the statement. Each item is used once, in one place.
Check yourself
1. A cash book shows RM2,330. Bank charges of RM30 are missing from it. A lodgement of RM400 is not yet credited and cheques of RM500 are unpresented. What is the bank statement balance?
Show answer
Adjusted cash book = 2,330 − 30 = RM2,300. The statement balance plus the lodgement minus the cheques must equal 2,300.
Statement + 400 − 500 = 2,300, so statement = 2,300 + 100 = RM2,400.
Check: 2,400 + 400 − 500 = 2,300.
2. Which of these are posted in the cash book: a bank charge, an unpresented cheque, a standing order missing from the books?
Show answer
The bank charge and the standing order are posted. The unpresented cheque is already in the cash book and only affects the reconciliation.
3. Student A reaches RM4,150 and Student B reaches RM4,300. The cash book started at RM4,300 and a direct debit of RM150 was missing. Who is right?
Show answer
The gap is 4,300 − 4,150 = 150, which equals the direct debit. Student B forgot to post it. Student A is correct: 4,300 − 150 = RM4,150.
Where this leads next
Next, learn to find an error from an unbalanced statement without guessing. The bank reconciliation walkthrough lets you practise both routes, and the percentage-base explorer is useful when a difference comes from a percentage.
Students often reach a final figure that is almost right and cannot say why. A teacher in online one-to-one Accounting tuition can trace that gap with you in a single lesson.