Bank reconciliation statement: a practical guide

A bank reconciliation compares two records of the same money: the client’s own books (the cash book or bank ledger) and the bank statement. It explains every difference between them, line by line, until both sides agree. The bank reconciliation statement is the short schedule that shows how you got there.

Every accountant learns the theory in the first semester. In practice, at a firm handling dozens of small clients, the hard part is not the arithmetic. It is the documents: the payment on the statement that nobody can explain because the receipt never arrived.

This guide covers both.

Why it matters

• It catches errors. A cheque keyed as RM1,250 instead of RM1,520, a payment posted twice, a deposit posted to the wrong bank account.
• It catches what the books don’t know yet. Bank charges, interest, standing instructions, a customer’s cheque that bounced.
• It catches what shouldn’t be there. Payments the client didn’t authorise, or personal spending run through the business account.
• It proves the cash figure. The bank balance in the accounts is one of the first things an auditor or LHDN will test, and every line behind it needs a supporting document. Business records must be kept for 7 years under the Income Tax Act, and LHDN’s Public Ruling 4/2000 names “invoices, bank statements, pay-in slips, cheque butts, receipts for payments” among the supporting documents a company must keep, so that includes the receipts behind the bank lines. More on that in how long to keep receipts in Malaysia.

Why do the bank statement and the cash book differ?

Almost every difference falls into one of two groups.

Timing differences: the book is right, the bank hasn’t caught up.

• Deposits in transit. Cash or cheques banked on the last day of the month that the bank credits on the 1st of next month.
• Unpresented cheques. Cheques the client has written and recorded, but the supplier hasn’t banked yet.

Items the bank knows about and the book doesn’t.

• Bank charges, stamp duty on cheque books, and service fees
• Interest credited by the bank
• Standing instructions and direct debits, such as loan repayments or insurance
• Transfers in from customers (DuitNow, FPX, IBG) that nobody told the bookkeeper about
• A customer’s cheque that bounced and was reversed
• Errors on either side

The first group goes on the bank side of the reconciliation. The second group gets posted into the books.

How do you prepare a bank reconciliation?

1. Get both records for the same period. The bank statement for the month, and the cash book or bank ledger up to the same date.
2. Tick off what matches. Go line by line and match each deposit and payment on the statement to an entry in the book. Same amount, similar date.
3. List what’s left on the statement. Charges, interest, standing instructions, unexpected transfers. These need entries in the book, and each one needs a document behind it.
4. List what’s left in the book. Deposits in transit and unpresented cheques. These are timing differences and stay on the reconciliation until they clear.
5. Update the book. Post the bank-only items, with their documents, and correct any errors.
6. Prepare the statement. Start from the bank statement balance, adjust for timing differences, and show that it equals the updated book balance.
7. Follow up next month. Every timing difference should clear in the next statement. One that doesn’t, such as a cheque still unpresented after three months, needs a closer look.

A worked example

A made-up client, Kedai Runcit Maju Sdn Bhd, March 2026:

• The bank statement shows a closing balance of RM18,450.00.
• The cash book shows RM19,050.00.

After ticking, five items are left:

• Cash sales of RM2,300.00 banked on 31 March, credited by the bank on 1 April (deposit in transit)
• Cheque 104512 for RM1,780.00 to a supplier, not yet presented (unpresented cheque)
• Bank charges of RM30.00, not yet in the cash book
• A customer’s cheque for RM500.00 that bounced, not yet in the cash book
• Interest of RM450.00 credited by the bank, not yet in the cash book

First, update the cash book:

Cash book	RM
Balance per cash book, 31 March	19,050.00
Add: interest credited	450.00
Less: bank charges	(30.00)
Less: dishonoured cheque	(500.00)
Updated cash book balance	18,970.00

Then the bank reconciliation statement:

Bank reconciliation statement as at 31 March 2026	RM
Balance per bank statement	18,450.00
Add: deposit in transit	2,300.00
Less: unpresented cheque 104512	(1,780.00)
Balance per cash book	18,970.00

Both sides agree at RM18,970.00. The deposit and the cheque should appear on April’s statement. If they don’t, find out why.

The hard part: lines with no document

In the example every item had an explanation. Real client statements are rarely that tidy. There is a RM86.40 card payment on the 14th, a RM1,200 transfer out on the 22nd, and nobody at the firm knows what either was for. The client paid for something. The receipt is in their car, their email or their WhatsApp, or it was never kept.

That is where most of a firm’s reconciliation time goes: not matching, but chasing. Scrolling through a statement, writing a list of unexplained lines, messaging the client, waiting, asking again.

Two habits make it shorter:

• Collect documents monthly, not yearly. If receipts come in every month, most statement lines already have a document waiting when you reconcile. See how to get client receipts without the monthly chase.
• Let the statement write the chase list. Match documents to statement lines first. Whatever is left with no document is the list to send the client, with dates and amounts, instead of a vague “any more receipts?”.

Where AccPilot fits

AccPilot does the matching half of this for you. Upload the client’s bank statement along with their receipts and invoices, and AccPilot reads both, matches each statement line to a document, and shows the lines with no document as a chase list you can send the client (how bank statement matching works). Your staff check the matches and export one clean Excel into your accounting software. Bank matching is included in every plan.

The judgement stays with your firm: what an unexplained transfer was, whether a cheque is too old, what to post. AccPilot removes the ticking and the list-making, so that judgement starts sooner.

To see it on one of your clients’ statements, book a free demo.