Bank Reconciliation Example: Worked Solution and Practice

Quick Answer: A bank reconciliation example starts with two numbers that disagree: the balance on the bank statement and the balance in your own books. In the worked example below, a bakery's bank shows $18,642.17 and its books show $16,915.40 on June 30. After adding a deposit in transit, subtracting three outstanding checks, and posting a fee, interest, an unrecorded customer payment and a transposed check amount, both sides land on $18,182.92.

Here is a complete bank reconciliation example with every number shown, followed by a harder practice problem with its solution. You will see which items adjust the bank balance, which adjust the book balance, how each one is found, and the journal entries that bring the ledger up to date once both adjusted balances match to the cent.

The starting point: two balances that disagree

Harbor Lane Bakery closes its books monthly. On June 30 the bookkeeper has two documents open side by side:

• The June bank statement, ending balance $18,642.17.
• The cash account in the general ledger (the "books"), balance $16,915.40.

The gap is $1,726.77. That figure means nothing on its own. A reconciliation does not try to explain the gap as one number; it explains it item by item until nothing is left over. If you want the general procedure before the arithmetic, the bank statement reconciliation guide walks through it without numbers. This page is the numbers.

How do you find the reconciling items?

The bookkeeper ticks every line on the statement against the ledger. Anything that appears on only one side becomes a reconciling item. For Harbor Lane, the unticked lines were:

In the ledger, not on the statement

• A deposit of $2,380.00 made in the night drop at 8 p.m. on June 30. The bank credited it on July 1.
• Check #1187 to the flour supplier, $612.50.
• Check #1191 for the oven service contract, $1,940.00.
• Check #1193 to a packaging vendor, $286.75.

On the statement, not in the ledger

• Monthly account maintenance fee, $35.00.
• Interest credited, $11.52.
• An ACH credit of $1,246.00 from a wholesale café customer that paid its invoice directly into the account. Nobody recorded the receipt.

On both, but at different amounts

• Check #1185 cleared the bank at $427.00. The ledger shows it as $472.00. The check image confirms $427.00 is correct, so the bookkeeper typed the digits in the wrong order.

That last one is worth a pause. A difference caused by swapping two digits is always divisible by 9. Here, $472.00 − $427.00 = $45.00, and 45 ÷ 9 = 5. When a reconciliation is off by a number that divides cleanly by 9, look for a transposition first.

The worked reconciliation

Every item goes on the side that does not yet know about it. The bank does not know about the night deposit or the three checks, so those adjust the bank balance. The books do not know about the fee, the interest, the ACH receipt or the true amount of check #1185, so those adjust the book balance.

Both adjusted balances are $18,182.92. The reconciliation is finished. That figure is the cash the bakery actually controls on June 30: what the bank holds, plus money already on its way in, minus checks already promised to suppliers.

Notice the direction of the check error. The ledger overstated a payment by $45.00, so the books removed too much cash. Fixing it adds $45.00 back. If the bookkeeper had recorded $427.00 as $472.00 on a deposit instead, the fix would run the other way.

Which journal entries does the example require?

Only the book-side items need entries. The bank-side items (the night deposit and the three checks) are already in the ledger correctly; they simply have not reached the bank yet and will clear in July without any action.

1. Interest: debit Cash $11.52, credit Interest Income $11.52.
2. Customer ACH: debit Cash $1,246.00, credit Accounts Receivable $1,246.00 (it paid an open invoice).
3. Check #1185 correction: debit Cash $45.00, credit Inventory or Supplies Expense $45.00, whichever account the original check hit.
4. Maintenance fee: debit Bank Service Charges $35.00, credit Cash $35.00.

After posting these four entries, the ledger cash balance reads $18,182.92, the same as the adjusted figure. That is the test that the entries are right.

A harder practice example (try it before reading the solution)

Delgado Landscaping reconciles its operating account for March. Work it out on paper first.

• Bank statement balance, March 31: $7,304.88
• Ledger cash balance, March 31: $9,118.60
• Two deposits recorded on March 31 but credited by the bank in April: $1,450.00 and $615.25
• Checks not yet cleared: #402 $388.00, #407 $1,212.40, #409 $95.10
• The bank paid a $260.00 check that belongs to a different customer with a similar account number
• A customer's check for $540.00 came back unpaid for insufficient funds, and the bank charged a $30.00 returned-item fee
• Monthly service charge: $18.00
• Interest credited: $4.33
• A deposit of $1,320.00 was entered in the ledger as $1,230.00
• The electric company's autopay of $690.30 was never entered

Solution

The two traps in this one:

• The bank's mistake goes on the bank side. Delgado does not record anything for the $260.00. It calls the bank, which reverses the charge, and the reconciliation shows it as an addition to the bank balance until the reversal appears.
• The bounced check is a book-side deduction, not a bank-side one. Delgado had recorded the $540.00 as cash received. The bank took it back, so the books must too. The entry is debit Accounts Receivable $540.00, credit Cash $540.00, which reopens the customer's balance so someone chases it.

If your answer came out at $7,414.63 on the bank side, you subtracted the bank error instead of adding it. If your book side came out $180.00 too low, you treated the $90.00 deposit error as a deduction.

What does a finished bank reconciliation look like?

The paper (or PDF) version that goes in the month-end file usually has:

• A header with the account name, the last four digits of the account number, and the statement date.
• The two blocks shown above, bank side and book side, each ending at the adjusted balance.
• A list of outstanding checks by number, date and payee, so next month's preparer knows exactly what to expect to clear.
• The preparer's initials and date, and a reviewer's initials if the business separates those duties.
• The journal entries posted as a result, or a reference to them.

Keep the statement itself with it. Auditors want to see the bank record behind your cash figure, and the IRS notes in its guide to what kind of records to keep that for most small businesses the checking account is the main source for entries in the books, with canceled checks or electronic transfer records as proof of payment.

Doing the same example faster with real data

Ticking 40 lines by hand is fine. Ticking 400 is where people lose an afternoon. Two things shorten it:

1. Get the statement into rows. The bank's own CSV export is the cleanest source if it covers the period you need. When all you have is a PDF, QuickBankConvert reads the statement file you downloaded (no bank login involved, and password-protected PDFs work: you enter the password on upload) and gives you one row per transaction with a signed amount and the running balance, plus the opening and closing balances to check against.
2. Match in a spreadsheet instead of on paper. Sort both lists by amount and the pairs line up. The Excel bank reconciliation build shows formulas that flag unmatched rows automatically.

For checks that stay unticked month after month, the guide to outstanding checks in a bank reconciliation covers when to void and reissue.

Related guides

• Book-to-bank reconciliation: the same logic framed from the ledger's side.
• Bank statement reconciliation guide: the step-by-step procedure.
• Building a bank reconciliation in Excel: templates and matching formulas.
• Outstanding checks in a bank reconciliation: stale and uncashed checks.