After the closing balances agree, compare the month’s movements as a second, independent test. Work out what the statement’s receipts and payments should be from the cash book, then match them to the statement totals. If they agree, the reconciliation is reliable.
This is the final step in bank reconciliation, and it uses the skills from reconciling from either starting balance and timing items.
Why does a movement check add anything?
A closing-balance reconciliation uses only the end figures. A mistake in a list, or a plug figure, can still make them agree.
A movement check uses the whole month’s totals and the opening reconciliation. Because it uses different numbers, a hidden error rarely survives both tests.
How to run it, step by step
- Reconcile the closing balances in both directions.
- List last month’s timing items that cleared this month.
- Expected statement receipts = cash book receipts − this month’s uncredited lodgements + last month’s lodgements that cleared + direct credits.
- Expected statement payments = cash book payments − this month’s unpresented cheques + last month’s cheques that cleared + charges and direct debits.
- Test it: opening statement balance + receipts − payments = closing statement balance. Compare with the real statement totals.
Worked example
Mei Ling Bakery reconciled at 30 September: statement RM 3,200, cash book RM 3,000, with unpresented cheques RM 350 and an uncredited lodgement RM 150. Check: 3,200 − 350 + 150 = 3,000.
In October, the cash book shows receipts of RM 9,400 and payments of RM 8,100, so the unadjusted closing balance is 3,000 + 9,400 − 8,100 = RM 4,300.
The statement shows bank charges RM 25, a direct debit RM 200 and a direct credit RM 500 not in the cash book. At 31 October, unpresented cheques are RM 480 and an uncredited lodgement is RM 275. Last month’s items all cleared.
Update the cash book: 4,300 − 25 − 200 + 500 = RM 4,575.
Statement balance: 4,575 + 480 − 275 = RM 4,780.
Expected statement receipts: 9,400 − 275 + 150 + 500 = RM 9,775.
Expected statement payments: 8,100 − 480 + 350 + 25 + 200 = RM 8,195.
Movement test: 3,200 + 9,775 − 8,195 = RM 4,780, which equals the statement closing balance. The reconciliation passes both tests.
The mistake to watch for
A student forgets that September’s cheque of RM 350 cleared in October and keeps it in the list.
Mistaken working: Unpresented cheques 480 + 350 = 830. Statement = 4,575 + 830 − 275 = RM 5,130.
The actual statement says RM 4,780.
The difference is exactly RM 350, the size of the old cheque. A movement check shows the statement payments already include that cheque. It is not a timing item any more, so it must be removed from the list.
Never plug a difference. If it equals a single item you know, look for that item.
Check yourself
Cash book October: opening RM 2,000, receipts RM 6,000, payments RM 5,200. Last month’s unpresented cheques of RM 300 and uncredited lodgement of RM 150 cleared.
Bank charges of RM 20 are on the statement only. At 31 October, unpresented cheques are RM 400 and an uncredited lodgement is RM 250.
1. Find the expected statement receipts.
Show answer
6,000 − 250 + 150 = RM 5,900.
2. Find the expected statement payments.
Show answer
5,200 − 400 + 300 + 20 = RM 5,120.
3. The statement opening balance was RM 2,150. What closing balance does the movement check give, and does it match the reconciliation?
Show answer
2,150 + 5,900 − 5,120 = RM 2,930. Reconciliation: updated cash book 2,000 + 6,000 − 5,200 − 20 = 2,780, then 2,780 + 400 − 250 = RM 2,930. They match.
Where this leads next
Now try the bank reconciliation practice set, and use the bank reconciliation walkthrough to see each check. The percentage-base explorer supports any rate-based items.
If checks like this feel slow in an exam, our teachers can help you decide which one to run first in online one-to-one Accounting tuition.