Prepare a bank reconciliation statement
Reconcile the updated cash-book balance to the bank statement by accounting for timing differences exactly once.
Cambridge International AS & A Level Accounting 9706, 2026–2028 syllabus, Version 2. These lessons cover Topic 1.4 only. Practice is self-checked, not an official Cambridge grade; the separately published 2029 syllabus, timed papers and human subject-teacher review remain outstanding.
Before you begin
- Use double-entry, ledger and trial-balance knowledge from Topic 1.2. Reconciliations compare records with independent or separately maintained evidence; an unexplained difference needs investigation.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
What is an outstanding lodgement?
What you will learn
- Prepare a bank reconciliation statement from an updated cash book
- Use the correct direction for outstanding lodgements and unpresented cheques
- Check that both routes produce the same balance
Reconcile from one balance to the other
First update the cash book for bank-originated items and obtain the corrected book balance. The reconciliation then accounts for timing differences: an outstanding lodgement has been recorded by the business but not yet credited by the bank; an unpresented cheque has been recorded by the business but has not yet been paid by the bank.
Starting from the updated cash-book balance, add an unpresented cheque because the bank statement has not yet reduced its balance, and subtract an outstanding lodgement because the bank has not yet increased its balance. Alternatively, reconcile from the bank statement in the opposite direction: subtract unpresented cheques and add outstanding lodgements.
Use dates and avoid double counting
A reconciliation is prepared at a date. List each item with a description and amount, and check subsequent statements to see whether old timing differences later clear. A stale item may point to an error or a lost payment and needs investigation.
The adjusted balances should agree. If they do not, check arithmetic, whether the cash book was updated first, whether an item was included twice, and whether each item is correctly classified as a timing difference or an omitted book entry.
Pause and explain
From the cash-book balance, what do you do with a lodgement not yet shown by the bank?
Worked example
After updating, the cash book shows $5,235 debit. There is an unpresented cheque of $640 and an outstanding lodgement of $920. Find the bank-statement balance expected at the reconciliation date.
Show the worked solution
- Start with the adjusted cash-book balance of $5,235.
- Add the unpresented cheque $640 and subtract the outstanding lodgement $920.
- Expected bank statement balance = 5,235 + 640 − 920 = $4,955.
Answer The expected bank-statement balance is $4,955. Starting from the statement gives 4,955 − 640 + 920 = $5,235 adjusted cash book.
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Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
Updated cash book is a $3,780 debit. Cheques of $410 are unpresented and a $265 lodgement is outstanding. Calculate the expected bank-statement balance.
Give me a hint
From book to bank, add outstanding cheques and subtract outstanding receipts.
Compare my reasoning
- Start with $3,780.
- Add $410 and subtract $265.
- Expected statement = 3,780 + 410 − 265 = $3,925.
Expected bank-statement balance: $3,925.
Look for these in your work
- Starting balance selected
- Signs correct
- Arithmetic checked
Bank statement shows $2,460. Unpresented cheques are $180 and outstanding lodgements are $720. Calculate the adjusted cash-book balance, assuming the cash book is already updated.
Give me a hint
From bank to book, subtract unpresented cheques and add outstanding lodgements.
Compare my reasoning
- Start with $2,460.
- Subtract $180 and add $720.
- Adjusted cash book = 2,460 − 180 + 720 = $3,000 debit.
The adjusted cash-book balance is $3,000 debit.
Look for these in your work
- Opposite direction used correctly
- Arithmetic correct
- Debit balance stated
A reconciliation is out by $95. The preparer has included a $95 bank fee both in the cash-book update and as a reconciling item. Diagnose the issue and state the correction.
Give me a hint
Check whether this is a timing difference or an item already entered in the books.
Compare my reasoning
- A bank fee shown on the statement should be entered in the cash book.
- After updating the cash book, it is no longer an outstanding timing difference.
- Remove the duplicate $95 reconciling item and recalculate.
The fee was counted twice. Keep it in the updated cash book and remove it from the reconciliation's timing items; the adjusted balances should then agree.
Look for these in your work
- Correct category identified
- Duplicate removed
- Reconciliation rechecked
Common mistakes
- Adding an outstanding lodgement when starting from the cash book
- Forgetting to update the cash book before listing timing differences
- Counting a bank charge in the reconciliation after it has already been recorded in the cash book
What can you explain now?
Starting with the updated cash-book balance, how is an unpresented cheque treated?
Compare with the explanation
Add it to reach the bank-statement balance
The bank has not yet deducted the payment recorded by the business.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
State the two adjustments from cash book to statement, then reverse them from statement to cash book.
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.