Intermediate level · Module 3: Accounting Systems and Month-End Close · Lesson 2 of 3
Bank and Mobile-Money Reconciliation
Prove that the cash book agrees with the bank or mobile-money statement.
In this lesson you will
- Prepare a bank reconciliation
- Investigate and correct differences
Key concepts
bank statementunpresented chequesdeposits in transitbank charges
The lesson
A reconciliation explains differences between your records and the statement. Timing differences — cheques not yet presented, deposits not yet credited — adjust the bank balance.
Items the bank recorded but you did not — charges, interest, direct transfers from customers — are entered in your cash book.
Both adjusted balances must agree. Reconcile every account monthly, including mobile money, and investigate any unexplained difference.
Step by step
- Tick matching items on the statement and cash book.
- List timing differences.
- Update the cash book for bank-only items.
- Prove both adjusted balances agree.
Reconciling the cash book with the bank statement
Explaining a 150,000 SSP difference between the bank statement and the cash book.
| Item | Working | Amount |
|---|---|---|
| Balance per bank statement | from the statement | 2,000,000 |
| Add: deposit in transit | banked 31 March, credited 1 April | 250,000 |
| Less: unpresented cheque | cheque 0457 to a supplier | (350,000) |
| Adjusted bank balance | 2,000,000 + 250,000 − 350,000 | 1,900,000 |
| Balance per cash book | before adjustments | 1,850,000 |
| Less: bank charges | shown on statement, not yet recorded | (15,000) |
| Add: customer transfer | received directly, not yet recorded | 65,000 |
| Adjusted cash book balance | 1,850,000 − 15,000 + 65,000 | 1,900,000 |
Explanation
Timing differences — the deposit in transit and the unpresented cheque — adjust the bank side; they will clear by themselves.
Items only the bank knew about — charges and the customer's transfer — are entered in the cash book. Both sides now show 1,900,000 SSP.
Check your understanding
Both adjusted balances equal 1,900,000 SSP, so the reconciliation is complete.
Practice activity
Reconcile the business's bank account for the month.
Expected result: A signed reconciliation with both balances agreeing.
Check your understanding
-
Which side does an unpresented cheque adjust?
Show answer
The bank statement balance.
-
Where are bank charges you did not record entered?
Show answer
In the cash book.
Taught live by an instructor — online or in person. Free course lessons are for self-study and do not lead to a certificate — see registration options.