A reconciliation bridges two balances, so you can start at either end. From the cash book: add unpresented cheques, deduct uncredited lodgements. From the statement: deduct unpresented cheques, add uncredited lodgements. Both routes reach the same pair of balances.
It sits after updating the cash book and classifying items in bank reconciliation.
Why do the rules reverse?
The statement balance differs from the updated cash book only because of timing items. Each timing item pushed the bank’s figure away from yours in a known direction.
An unpresented cheque is already deducted in your cash book but not in the bank’s. So the bank balance is higher than your cash book. To go from cash book to bank, add it back.
An uncredited lodgement is already added in your cash book but not in the bank’s. So the bank balance is lower. To go from cash book to bank, deduct it.
Going the other way, you simply do the opposite.
How to reconcile, step by step
- Update the cash book for unrecorded items first.
- List unpresented cheques and uncredited lodgements separately, with totals.
- Write your starting balance and label it (cash book or statement).
- Apply the sign rule for that starting point.
- Compare with the other balance. They must agree exactly.
Worked example
Dewi Electricals has an unadjusted cash book balance of RM 6,445 (debit) at 31 October. The statement shows RM 6,120. The differences are:
- Bank charges RM 25 and a direct debit RM 65, both on the statement only.
- Unpresented cheques: RM 540 and RM 275.
- Uncredited lodgement: RM 1,050.
Update the cash book: 6,445 − 25 − 65 = RM 6,355.
Totals: unpresented 540 + 275 = RM 815. Uncredited lodgement RM 1,050.
Direction A, from the cash book: 6,355 + 815 − 1,050 = RM 6,120. This agrees with the statement.
Direction B, from the statement: 6,120 − 815 + 1,050 = RM 6,355. This agrees with the updated cash book.
| From cash book | From statement | |
|---|---|---|
| Starting balance | 6,355 | 6,120 |
| Unpresented cheques | + 815 | − 815 |
| Uncredited lodgement | − 1,050 | + 1,050 |
| Arrives at | 6,120 | 6,355 |
The mistake to watch for
A common slip is to use the cash book rule while starting from the statement.
Mistaken working: 6,120 + 815 − 1,050 = RM 5,885.
The student added the unpresented cheques when starting from the statement.
This gives RM 5,885, which agrees with neither balance. When your result matches neither figure, check the direction first.
Ask: did I start from the bank’s figure or mine? Then reverse the signs if needed.
Check yourself
1. The statement shows an overdraft of RM 380. Unpresented cheques total RM 150 and an uncredited lodgement is RM 200. Find the updated cash book balance.
Show answer
Start from the statement, so reverse the signs: −380 − 150 + 200 = −RM 330. The cash book shows an overdraft of RM 330.
2. The updated cash book shows RM 1,900. Unpresented cheques are RM 600 and an uncredited lodgement is RM 450. What should the statement show?
Show answer
From the cash book: 1,900 + 600 − 450 = RM 2,050.
3. A reconciled balance is RM 4,200. Unpresented cheques are RM 300 and uncredited lodgements are RM 500. What is the bank statement balance?
Show answer
4,200 + 300 − 500 = RM 4,000.
Where this leads next
Continue with why timing items are not duplicate entries, then test both directions in the bank reconciliation walkthrough. The percentage-base explorer is useful when an item is quoted as a rate.
If you only trust the method in one direction, our teachers can trace the sign logic with you in online one-to-one Accounting tuition.