Every reconciliation item does one of two jobs. It either corrects the cash book or explains a timing gap between the cash book and the bank. If an item does both, it has been posted twice.
This page gives a sorting routine and a worked example. It supports bank reconciliation and pairs with the bank reconciliation walkthrough.
Why do timing items get posted twice?
A reconciliation list mixes two kinds of item, and they look alike on the page. A student sees “cheque 380 not yet cleared” and thinks “that is a difference, so I should adjust for it”.
The cash book already contains that cheque. Your business wrote it and recorded it. Only the bank is waiting, so the cash book is correct and needs no entry.
A routine that keeps the two jobs apart
- Write the cash book balance before changes.
- Go through the bank statement and mark each item that is not in your cash book: charges, interest, direct credits, standing orders, dishonoured cheques.
- Update the cash book with those items only. This gives the updated cash book balance.
- List what is left over: cheques you wrote that have not cleared, and deposits you made that have not been credited. These are timing items.
- Start from the statement balance. Add uncredited deposits, subtract unpresented cheques.
- Compare with the updated cash book. They should agree exactly.
Worked example
A small business has these records on 30 November.
- Cash book balance before changes: 4,200 (debit).
- Bank statement balance: 4,810.
- On the statement but not in the cash book: a bank charge of 30 and a customer’s direct credit of 500.
- Cheque no. 118 for 380 has been written but not presented.
- A deposit of 240 was made on 30 November and is not yet credited by the bank.
Step 1, update the cash book. Start at 4,200. The charge is a payment, so subtract 30: 4,170. The direct credit is a receipt, so add 500: 4,670.
Step 2, reconcile from the statement. Start at 4,810. Add the uncredited deposit: 5,050. Subtract the unpresented cheque: 4,670.
Both sides equal 4,670, so the reconciliation agrees. The 380 cheque and the 240 deposit appear only in Step 2. They do not appear in the cash book update.
The mistake to watch for
The student updates the cash book for everything on the page, then also uses the timing items on the bank side.
Mistaken cash book: 4,200 − 30 + 500 − 380 + 240 = 4,530
Reconciliation from the statement: 4,810 + 240 − 380 = 4,670
The two totals differ by 140, which is the net of the two timing items (380 − 240). That is the clue: when the gap equals the net of your timing items, they have been counted twice. The correction is to remove the 380 and the 240 from the cash book, because they were already in it.
Check yourself
Sort each item as cash book entry or timing item only.
1. Interest of 15 credited by the bank.
Show answer
Cash book entry. The bank recorded it and your cash book did not. Add 15.
2. A cheque for 210 sent to a supplier, not yet cleared.
Show answer
Timing item only. It is already in the cash book. It appears in the reconciliation as an unpresented cheque, subtracted from the statement balance.
3. The cash book shows 3,100 before changes. A bank charge of 20 is on the statement and a deposit of 150 is uncredited. What is the updated cash book balance?
Show answer
Only the charge changes the cash book: 3,100 − 20 = 3,080. The 150 deposit is a timing item, so it does not change the cash book.
Where this leads next
Practise the full routine in separating unpresented payments from unrecorded charges and why timing items are not duplicate entries. The percentage-base explorer helps if percentage calculations such as interest rates cause slips.
If you sort items correctly in class but mix them up in a timed question, online one-to-one Accounting tuition lets a teacher watch your sorting live.