Each transaction is recorded once in your books, on the day your business does it. The bank records it on its own day. A timing item is the gap between those two days, so it is bridged in the reconciliation and never entered a second time.
This lesson follows reconciling from either starting balance in bank reconciliation.
Why does the same event appear on two dates?
Two sets of books record the same event. Your cash book records the moment you write a cheque or prepare a deposit. The bank records the moment the cheque is presented or the deposit is processed.
Between those two moments, the statement and your cash book disagree. Once the bank catches up, they agree again, with no change to your books.
How to think about it, step by step
- Find the date your business recorded it. That is the only date your cash book needs.
- Find the date the bank recorded it. If this is after the period end, it is a timing item.
- Put it on the reconciliation at the period end.
- Next month, remove it from the list when it appears on the statement.
- Never make a cash book entry just because it appears on the statement.
Worked example
Kedai Kasut Ria writes cheque 3051 for RM 640 to a supplier on 29 October and enters it in the cash book. It also banks RM 800 in takings on 31 October after the bank’s cut-off time.
| Date | Event | Cash book | Statement |
|---|---|---|---|
| 29 Oct | Cheque 3051 written | credit bank 640 | not yet shown |
| 31 Oct | Takings banked | debit bank 800 | not yet shown |
| 2 Nov | Deposit processed | no new entry | credit 800 |
| 4 Nov | Cheque 3051 paid | no new entry | debit 640 |
Suppose the correct cash book balance at 31 October is RM 2,900. The statement at 31 October would be 2,900 + 640 − 800 = RM 2,740.
In November, the two items appear on the statement. They are removed from the reconciliation list, and nothing is entered in the cash book.
The mistake to watch for
A student sees the cheque on the November statement and credits the bank column RM 640 again.
Mistaken working: Cheque 3051 appeared on the statement, so credit bank RM 640 in November.
The student treated a bank record as a new transaction.
The result is that the cash book falls by RM 640 twice. The October balance of 2,900 would drop to 2,260 for this one payment. The supplier’s account would also be debited twice, so you would appear to owe RM 640 less than you really do.
The correction is to look for the original entry first. If the cheque is already in October’s cash book, no November entry is needed.
Check yourself
1. A cheque for RM 500 was written on 28 October and appears on the statement on 3 November. State the cash book entries for October and November.
Show answer
October: credit bank RM 500 on 28 October. November: no entry. In the October reconciliation it was an unpresented cheque. In November it simply clears.
2. A student enters an uncredited lodgement of RM 900 in the cash book a second time. What is the effect?
Show answer
The cash book bank balance is overstated by RM 900, and the customer or income account is credited twice. The reconciliation will fail to agree by RM 900.
3. Which of these needs a cash book entry: (a) interest received RM 12; (b) unpresented cheque RM 90; (c) uncredited lodgement RM 300; (d) dishonoured cheque RM 150?
Show answer
(a) and (d). The bank started both and the cash book does not show them. (b) and (c) are timing items that are already recorded.
Where this leads next
Next, learn to verify the reconciliation with an independent movement check, and use the double-entry and ledger trainer to see why a duplicate entry upsets the ledger. The percentage-base explorer helps with rate-based items.
Students who understand the rule yet still double-record under time pressure can work on it with a teacher in online one-to-one Accounting tuition.