The test is simple: if your business started it and recorded it, it is a timing item with no entry. If the bank started it and your cash book does not show it, it needs an entry. Unpresented cheques and uncredited lodgements are timing items. Charges, standing orders, direct debits, direct credits and dishonoured cheques are unrecorded items.
This lesson follows updating the cash book in the bank reconciliation module.
Why do the two types behave differently?
Your cash book and the bank’s records are two separate sets of books. When you write a cheque, you record it the same day. The bank records it only when the cheque arrives, which may be days later.
That delay is a timing difference. Nothing is wrong in either book, and one will catch up with the other.
An unrecorded item is different. The bank has done something and your books have not caught up. Your cash book is incomplete, so it is corrected with an entry.
How to classify, step by step
- Find the item on one list only (cash book or statement), or on both.
- Ask: who started this? You or the bank?
- If it is on the cash book only and you started it, it is a timing item.
- If it is on the statement only and the bank started it, it is an unrecorded item.
- Treat each type accordingly: entry for unrecorded, reconciliation list for timing.
Worked example
Wira Fabrics has a cash book balance of RM 2,000 (debit) at 31 October. Comparing with the statement, these differences appear:
| Item | Where it appears | Started by | Type | Cash book entry? |
|---|---|---|---|---|
| Cheque 0412 to a supplier, RM 260 | cash book only | business | unpresented cheque | none |
| Bank charges, RM 18 | statement only | bank | unrecorded | credit bank 18 |
| Deposit of RM 700 banked on 31 October | cash book only | business | uncredited lodgement | none |
| Standing order for rent, RM 120 | statement only | bank | unrecorded | credit bank 120 |
| Customer transfer, RM 450 | statement only | customer to bank | unrecorded | debit bank 450 |
Update the cash book: 2,000 − 18 − 120 + 450 = RM 2,312.
Find the statement balance: 2,312 + 260 (unpresented) − 700 (uncredited lodgement) = RM 1,872.
Check from the statement: 1,872 − 260 + 700 = 2,312, which equals the updated cash book.
The cheque and the deposit never touched the cash book a second time. They only appear in the bridge between the two balances.
The mistake to watch for
Students sometimes write the RM 18 charge into the reconciliation list as if it were a timing difference, and leave the cash book at RM 2,000.
Mistaken working: Statement RM 1,872 − unpresented 260 + uncredited lodgement 700 = 2,312. Cash book RM 2,000. Difference RM 312, so “something is wrong”.
The difference of 312 is exactly 18 + 120 − 450 with the sign reversed, which are the three unrecorded items. The cash book was never updated. Once those three entries are made, the cash book becomes RM 2,312 and the two sides agree.
Check yourself
1. Classify each: (a) cheque 0507, RM 90, written on 30 October, not on the statement; (b) bank interest of RM 12 shown on the statement only; (c) cash banked on 31 October, RM 300, not yet on the statement.
Show answer
(a) Unpresented cheque, timing, no entry. (b) Unrecorded, debit the bank column RM 12 and credit interest received. (c) Uncredited lodgement, timing, no entry.
2. A customer’s cheque for RM 200 was paid into the bank last week and returned unpaid today. It is on the statement only. What is it, and what is the cash book entry?
Show answer
It is an unrecorded item (a dishonoured cheque). Credit the bank column RM 200 and debit the customer’s account RM 200.
3. True or false: an unpresented cheque must be credited to the cash book again in the next month.
Show answer
False. It was credited when written. In the next month it simply appears on the statement and drops off the reconciliation list.
Where this leads next
Next, practise reconciling from either starting balance, then use the double-entry and ledger trainer to confirm where each unrecorded item lands in the ledgers. The bank reconciliation walkthrough has labelled items to sort.
If you keep placing items in the wrong list, our teachers can watch your first move on each item in online one-to-one Accounting tuition.