Bank reconciliation statement: format, steps and example
Learn what a bank reconciliation statement is, how to format one, and follow a worked example in rand.
Written by Lena Hanna—Trusted CPA Guidance on Accounting and Tax. Read Lena's full bio
Published Monday 26 October 2026
Table of contents
Key takeaways
- Reconcile your bank accounts at least weekly so you catch errors and fraud early and have fewer transactions to review each time.
- A bank reconciliation statement records the differences between your bank statement balance and your cash book balance at a set date, and brings both to the same adjusted figure.
- Follow a clear eight-step process, checking deposits and withdrawals in both directions so every transaction appears in both sets of records.
- Bank reconciliation software with automatic feeds turns hours of manual work into minutes by matching your transactions for you and cutting down on manual errors.
What is bank reconciliation?
Bank reconciliation is the process of comparing your internal financial records against your bank statement to make sure they match. It confirms that every transaction in your books lines up with what your bank has recorded.
When you reconcile, you check that deposits and withdrawals in your records match those on your bank statement, and that you can explain any difference between the two.
Regular reconciliation catches errors early, helps prevent fraud, and keeps your records accurate for tax time. The Association of Certified Fraud Examiners found in its Occupational Fraud 2026: A Report to the Nations that account reconciliation was the first method to uncover 5% of occupational fraud cases.
What is a bank reconciliation statement?
A bank reconciliation statement is the document you prepare to summarise the differences between your bank statement balance and your cash book (book) balance at a set date. It sets out each timing difference and adjustment, then brings both balances to the same adjusted figure.
It isn't the same as your bank statement. Your bank issues the bank statement as a list of transactions on your account, while you prepare the reconciliation statement to explain and resolve the gaps between that statement and your own books. Think of it as the working that proves the bank reconciliation process was done correctly, and it supports the accuracy of your wider financial statements.
Why bank reconciliation matters
Bank reconciliation protects your business by keeping your financial records accurate and complete. Reconciling regularly helps you spot errors and discrepancies quickly, and accurate books are the foundation of good small business accounting.
Regular reconciliation gives you several practical benefits.
- Catches errors early: duplicate entries, missed transactions, or bank fees you can fix before they grow
- Prevents fraud: unauthorised transactions and suspicious activity show up quickly
- Better cash flow visibility: you always know how much money is available for managing your cash flow
- Simpler tax preparation: accurate records make tax time faster and less stressful
- Stronger decisions: you can trust your numbers when planning purchases, hiring, or investing in growth
Bank reconciliation steps
Follow these eight steps to reconcile your bank account with your business records. The process works whether you use a spreadsheet, accounting software, or pen and paper.
1. Get bank records
Gather a complete list of transactions from your bank for the period you're reconciling. You can pull this from a printed or PDF bank statement, your online banking portal, or a direct bank feed into your accounting software. If you have more than one account, such as a current account and a credit card, collect statements for each one.
2. Get business records
Open your record of income and expenses for the same period. This might be a logbook or notebook, a spreadsheet, or accounting software like Xero. Some software can pull in bills and receipts automatically using data capture tools, which saves time on manual entry.
3. Find your starting point
Identify the last date when your business records and bank balance matched exactly, and start your reconciliation from that point forward. If this is your first reconciliation, begin with the opening balance on your earliest bank statement and work forward from there.
4. Run through bank deposits
Check that each deposit on your bank statement appears in your records. If something is missing, add it and categorise it correctly. Common deposit types include:
- customer payments
- bank interest
- refunds
- transfers from other accounts
5. Check the income on your books
Verify that each income entry in your records matches a deposit on your bank statement. If something doesn't appear on the statement, investigate why. It might be a customer payment that bounced, a deposit you haven't banked yet, or income recorded in the wrong period.
6. Run through bank withdrawals
Check that every withdrawal on your bank statement appears in your records, then add any missing transactions with the correct category. Commonly missed items include:
- bank fees and charges
- debit orders
- automatic subscription payments
- interest charges
7. Check the expenses on your books
Verify that each expense in your records matches a withdrawal on your bank statement. If something doesn't appear, find out why. It could be a payment that hasn't cleared yet, an expense paid with cash, or a payment made from a different account.
8. End balance
After checking all deposits and withdrawals, your bank balance should match the total in your business records. If the numbers match, your reconciliation is complete, and this balance becomes the starting point for your next reconciliation. If there's a difference, review your work for missed transactions or data entry errors, using the troubleshooting sections below.
Bank reconciliation statement format and layout
A bank reconciliation statement is set out in two parts, and both should reach the same adjusted balance. Head it with your business name, the title "Bank reconciliation statement", and the date you're reconciling to.
- Adjust the bank side: start with the balance on your bank statement, add deposits in transit, then subtract unpresented (outstanding) payments to reach the adjusted bank balance
- Adjust the cash book side: start with your cash book balance, then correct for bank charges, debit orders, interest, and any errors so it reaches the same adjusted balance
When both sides agree, the account reconciles. Lay the statement out clearly so each adjustment is easy to follow, in the same way you check a trial balance.
Bank reconciliation statement example
Here's a worked example for a South African business reconciling to 31 March 2026, with all figures in rand. The bank side starts from the bank statement balance.
- Balance as per bank statement: R48,200
- Add: deposit in transit, a customer EFT received but not yet cleared: R6,500
- Less: unpresented payment still to clear: R3,150
- Adjusted bank balance: R51,550
The cash book side starts from the balance in your own books and corrects for items the bank has already applied.
- Balance as per cash book: R52,100
- Less: bank charges not yet recorded: R320
- Less: debit order not yet recorded: R450
- Add: interest earned not yet recorded: R220
- Adjusted cash book balance: R51,550
Both sides reach R51,550, so the statement reconciles and your records are in agreement.
Bank reconciliation problems
When records don't match, it's because amounts appear in one set of records but not the other. There's usually a straightforward explanation. Here are the two most common scenarios and how to resolve them.
Business books show something that isn't on your bank statement
If a transaction appears in your records but not on your bank statement, check for these common causes:
- Unbanked income: cash or cheques you received but haven't deposited yet
- Different payment method: you paid with cash or from another account
- Timing difference: a cheque you wrote hasn't cleared yet
- Recording error: the transaction was entered in the wrong period
Once you identify the cause, add a note to your records explaining the discrepancy.
Bank statement shows something that isn't in your business books
If a transaction appears on your bank statement but not in your records, check for these common causes:
- Forgotten transaction: a purchase or payment you didn't record
- Automatic payment: a debit order or subscription you overlooked
- Bank fees: charges the bank applied that you haven't entered
- Data entry error: a transaction recorded with the wrong amount
Add the missing transaction to your books or correct the error to bring your records into alignment.
Fixing bank reconciliation problems
Reconcile more frequently to make troubleshooting faster and easier. When you reconcile weekly or even daily, you have a clearer memory of recent transactions and spend less time hunting through invoices, receipts, and emails.
Frequent reconciliation turns a lengthy search into a quick check, and it fits naturally into a steady small business bookkeeping routine.
How to do bank reconciliation the easy way
Bank reconciliation software can turn hours of manual work into minutes. Instead of switching between documents and comparing numbers line by line, software matches transactions and flags discrepancies for you.
If you want reconciliation to be faster and more accurate, software is the stronger option, since it does the matching for you and highlights anything that needs a closer look.
How to use bank reconciliation software
Bank reconciliation software connects directly to your bank through a secure online feed. This removes manual data entry and speeds up matching.
When you reconcile in software like Xero, the system pulls in each bank transaction and does two things:
- Suggests a match: it pairs the transaction automatically with a corresponding entry in your accounts
- Prompts for details: it asks you to categorise unmatched transactions and adds them to your records
This reduces errors and saves you real time compared with reconciling by hand.
Make bank reconciliation quick and easy
Reconcile your accounts at least weekly to keep the process quick and manageable. Reconciling often means fewer transactions to review and a clearer memory of transaction details.
A few simple habits make reconciliation easier.
- Set a regular schedule: block time weekly or daily for reconciliation
- Organise your records: keep receipts, invoices, and statements easy to access
- Use software: automate bank feeds and matching to save time
- Stay on top of it: spend a few minutes daily rather than hours catching up monthly
Use Xero to streamline your bank reconciliation
Regular bank reconciliation keeps your records accurate, helps you catch errors early, and gives you confidence in your numbers. Xero brings your bank transactions in through automatic feeds, suggests matches for you to confirm, and shows your reconciled balance from any device.
Spend less time matching transactions and more time running your business. You can get one month free and see how Xero handles bank reconciliation for you, with more time left over for the bookkeeping that keeps your business on track.
FAQs on bank reconciliation
Here are answers to common questions about bank reconciliation statements.
What is a bank reconciliation statement?
It's a document that lists the differences between your bank statement balance and your cash book balance at a set date. It shows the adjustments that bring both balances to the same figure.
How do you prepare a bank reconciliation statement?
Start from your bank statement balance, add deposits in transit, and subtract unpresented payments, then adjust your cash book for charges, debit orders, interest, and errors. When both sides reach the same adjusted balance, the statement is complete.
What is the format of a bank reconciliation statement?
It's set out in two parts, one adjusting the bank balance and one adjusting the cash book balance, under a heading showing your business name and the reconciliation date. Both parts should end at the same adjusted balance.
What is the difference between a bank statement and a bank reconciliation statement?
Your bank produces the bank statement as a record of transactions on your account. You produce the reconciliation statement to explain and resolve the differences between that statement and your own books.
How often should you prepare a bank reconciliation statement?
At least monthly is a sensible minimum, though weekly or daily suits businesses with higher transaction volumes. More frequent statements make discrepancies quicker to spot and fix.
What should you do if your bank reconciliation statement doesn't balance?
Check for missed transactions, duplicate entries, unrecorded bank charges, and amounts entered incorrectly. If the two sides still differ, work backwards from your last statement that did balance.
Disclaimer
Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.
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