What Is a Bank Reconciliation Statement? How to Prepare One

By Markets & Investing DeskUpdated Nov 10, 2026

Definition

A bank reconciliation statement compares the cash balance in your books with your bank statement balance for the same date and lists every item that explains the difference.

Key takeaways

Deposits in transit are added to the bank balance, and outstanding checks are subtracted from it.
Bank service charges, overdraft fees and bounced NSF customer checks are subtracted from the book balance.
A difference evenly divisible by 9 often points to a transposition, such as $54 entered as $45.
Only book-side adjustments get journal entries; deposits in transit and outstanding checks simply clear later.

A bank reconciliation statement is a schedule that compares the cash balance in your own accounting records (the “book” balance) with the balance shown on your bank statement for the same date, then lists every item that explains the difference. When it is complete, both sides arrive at the same adjusted cash balance. That adjusted figure is the amount of cash you actually have, and the book-side adjustments become entries in your records.

Individuals can reconcile a personal checking account the same way. In accounting shorthand it is often called a BRS.

Balance as per book vs. bank

The two balances rarely match on statement day because the business and the bank record the same transactions at different times.

Items that adjust the bank balance (the bank hasn’t recorded them yet, or got them wrong):

Deposits in transit: money you recorded and deposited that hasn’t posted by the statement cut-off. Add to the bank balance.
Outstanding checks: checks you wrote and recorded that the payee hasn’t cashed or that haven’t cleared. Subtract from the bank balance.
Bank errors: a deposit posted to the wrong account, an amount keyed incorrectly, or an inadvertent credit by the bank. Add or subtract as needed, and notify the bank.

Items that adjust the book balance (you haven’t recorded them yet, or got them wrong):

Bank service charges and overdraft fees: subtract.
Interest earned and collections the bank made for you: add.
NSF (non-sufficient funds) checks: customer checks you deposited that bounced. Subtract.
Book errors: transposed digits, a check recorded for the wrong amount, a missed entry. Add or subtract.

The formula

Adjusted bank balance = Bank statement balance + Deposits in transit − Outstanding checks ± Bank errors

Adjusted book balance = Book balance + Interest and collections − Fees − NSF checks ± Book errors

The reconciliation is finished when the two adjusted balances are equal. If they aren’t, an item is missing or misclassified.

How to prepare a bank reconciliation statement

Step 1: Gather your documents

You need the bank statement for the period, your cash account in the general ledger or cashbook, the prior month’s reconciliation (for items that were outstanding then) and supporting records such as deposit slips, invoices and the check register.

Step 2: Match deposits and withdrawals

Tick off each deposit and credit on the bank statement against your records, then do the same for checks, transfers, card payments, interest and fees. Look for amounts that differ, for example a check that cleared for a different amount than you recorded, and for transactions you don’t recognize, which may be fraud.

Step 3: List the unmatched items

Anything in your records but not on the statement is a candidate deposit in transit or outstanding check. Anything on the statement but not in your records (fees, interest, returned checks, automatic debits) needs a book entry. Carry forward items from last month’s reconciliation that still haven’t cleared.

Step 4: Adjust both sides and compare

Apply the formula to each side. If the adjusted balances differ, recheck the matching. A difference evenly divisible by 9 often points to a transposition, such as $54 entered as $45.

Step 5: Record entries and keep the file

Post journal entries for every book-side adjustment, then keep the reconciliation, the supporting documents and notes explaining each error. Next month’s reconciliation starts from these records.

Tip: Know your bank’s deadline for disputing errors. Some banks limit corrections to a window such as 60 days after the error. For U.S. consumer accounts, Regulation E ties a consumer’s liability for unauthorized electronic transfers to reporting within 60 days of the statement.

Example of a bank reconciliation statement

Hypothetical example. Company ABC reconciles its checking account as of March 31.

Bank statement balance: $24,800
Book balance: $26,390
Deposit made March 31, not yet on the statement: $3,200
Outstanding checks: #1041 for $1,500 and #1043 for $900
Bank service charge: $45
Customer check returned NSF: $400
Interest credited by the bank: $15
Check #1040 cleared for $950 but was recorded in the books as $590 (a $360 book error)

Bank side	Amount	Book side	Amount
Balance per bank	$24,800	Balance per books	$26,390
Add: deposit in transit	$3,200	Add: interest earned	$15
Less: check #1041	($1,500)	Less: service charge	($45)
Less: check #1043	($900)	Less: NSF check	($400)
		Less: error on check #1040	($360)
Adjusted bank balance	$25,600	Adjusted book balance	$25,600

Both sides agree at $25,600, which is the cash figure that belongs on the balance sheet. Company ABC then records four entries: debit bank charges expense $45, debit accounts receivable $400 (the customer still owes the money), debit cash and credit interest income $15, and debit accounts payable or the related expense $360, with the offsetting credits to cash. Nothing is recorded for the deposit in transit or the outstanding checks; they will clear in April.

Why a bank reconciliation statement matters

Error and fraud detection: it confirms that checks, deposits and transfers cleared for the amounts you authorized, and unauthorized withdrawals or altered checks surface as statement lines with no matching record.
Cash control: decisions rest on the adjusted balance, not on a book figure that ignores fees or a returned check.
Accurate reporting: bank fees and interest reach the income statement, and the cash line on the balance sheet is supported by an external record.

How often to reconcile

Individuals and businesses with simple accounts usually reconcile monthly, when the bank statement arrives. High-volume businesses reconcile weekly or daily using the bank’s online transaction history. This leaves fewer items to investigate at once and more time to fix errors before a dispute deadline passes.

Limitations

A reconciliation proves that two records agree at one date. It doesn’t prove that every transaction was properly authorized or classified: a payment recorded in the books and paid by the bank will match even if it was charged to the wrong expense account or approved by someone without authority. If the same person writes checks, records them and reconciles the account, the process can hide misuse rather than reveal it, which is why businesses often separate those duties. Long-outstanding checks and recurring “unexplained differences” carried forward month after month are warning signs, not reconciling items.

Bank statement: the bank’s record of activity. The reconciliation statement is the comparison you prepare from it and your books.
Cash reconciliation: a broader term that may cover petty cash, registers or multiple accounts. Bank reconciliation covers one bank account.

FAQs

Can you reconcile without a bank statement?

Yes, if you can get the bank's transaction history and balance as of a specific cut-off date, usually from online banking. The method is the same; the cut-off date simply replaces the statement date.

The Bottom Line

Anyone who keeps a checking account, from an individual to a high-volume business, benefits from reconciling it monthly or more often. The adjusted balance shows the cash you actually have and catches fees, bounced checks, errors and unauthorized withdrawals before a bank's dispute deadline passes. A matching result proves only that two records agree, so businesses should also separate check writing, recording and reconciling duties.