Review / tutorial
Bank reconciliation examples: four solved problems from simple to hard
A bank reconciliation example starts with the statement ending balance and the book balance on the same date, adjusts the bank side for deposits in transit, outstanding checks and bank errors, adjusts the book side for fees, interest, NSF checks and book errors, and ends with two equal adjusted balances. The four solved problems below grow harder in steps, and every number is fictional.
A worked example
Four solved bank reconciliations
Fictional example 1 · Riverside Tutoring, April 30
| Bank side | Amount | Book side | Amount |
|---|---|---|---|
| Statement ending balance | 4,310.00 | Ledger balance | 3,605.00 |
| Add deposit in transit | 720.00 | No book side items | 0.00 |
| Less check 318 | (245.00) | ||
| Less check 321 | (1,180.00) | ||
| Adjusted bank balance | 3,605.00 | Adjusted book balance | 3,605.00 |
Fictional example 2 · Harbor Print Shop, May 31
| Bank side | Amount | Book side | Amount |
|---|---|---|---|
| Statement ending balance | 9,860.00 | Ledger balance | 9,580.60 |
| Add deposit in transit | 1,540.00 | Add interest earned | 6.40 |
| Less check 1104 | (1,915.00) | Less service fee | (22.00) |
| Less check 1107 | (400.00) | Less NSF customer check | (480.00) |
| Adjusted bank balance | 9,085.00 | Adjusted book balance | 9,085.00 |
Fictional example 3 · Cedar Lane Clinic, June 30
| Bank side | Amount | Book side | Amount |
|---|---|---|---|
| Statement ending balance | 12,475.00 | Ledger balance | 11,793.50 |
| Add deposit in transit | 2,300.00 | Add interest earned | 4.50 |
| Less check 2051 | (2,610.00) | Less service fee | (30.00) |
| Less check 2054 | (1,250.00) | Less NSF customer check | (650.00) |
| Add bank error, another customer’s check | 185.00 | Less check 2049 entered as 368.00, cleared 386.00 | (18.00) |
| Adjusted bank balance | 11,100.00 | Adjusted book balance | 11,100.00 |
Fictional example 4 · Northgate Landscaping, July 31
| Bank side | Amount | Book side | Amount |
|---|---|---|---|
| Statement ending balance | 7,940.00 | Ledger balance | 6,625.00 |
| Add July deposit in transit | 1,350.00 | Add customer electronic payment | 1,120.00 |
| Less check 884, carried from June | (1,200.00) | Less automatic loan payment | (415.00) |
| Less check 902 | (760.00) | ||
| Adjusted bank balance | 7,330.00 | Adjusted book balance | 7,330.00 |
Amounts in parentheses are subtracted. The journal entries for examples 2 to 4 are listed with each solution in the guide.
How to read these examples
Each problem uses the standard two-sided format. The bank side starts with the statement ending balance; the book side starts with the ledger cash balance on the same date. Try each problem from the facts before reading the solution. All businesses, check numbers and amounts are fictional.
Rule of thumb for placement: if the bank has not recorded an item yet, it adjusts the bank side; if you have not recorded it yet, it adjusts the book side and needs a journal entry.
Example 1: deposits in transit and outstanding checks
Facts: Riverside Tutoring’s April 30 statement shows 4,310.00. Its ledger shows 3,605.00. A 720.00 deposit made after hours on April 30 is not on the statement. Check 318 for 245.00 and check 321 for 1,180.00 have not cleared.
Solution: adjusted bank balance = 4,310.00 + 720.00 − (245.00 + 1,180.00) = 4,310.00 + 720.00 − 1,425.00 = 3,605.00. The book side has no adjustments, so the adjusted book balance is 3,605.00. Difference 0.00.
Journal entries: none. Both items are timing differences that the bank will record when the deposit posts and the checks are cashed.
Check your work: next month’s statement should show the 720.00 deposit in its first days and, eventually, both checks.
Example 2: adding a bank fee, interest and an NSF check
Facts: Harbor Print Shop’s May 31 statement shows 9,860.00 and its ledger shows 9,580.60. Deposit in transit 1,540.00. Outstanding checks 1104 for 1,915.00 and 1107 for 400.00. The statement also shows interest of 6.40, a 22.00 monthly service fee and a customer’s 480.00 check returned for nonsufficient funds (NSF), none of which are in the ledger.
Solution, bank side: 9,860.00 + 1,540.00 − 2,315.00 = 9,085.00.
Solution, book side: 9,580.60 + 6.40 − 22.00 − 480.00 = 9,085.00. Difference 0.00.
Journal entries: debit Cash 6.40, credit Interest Income 6.40. Debit Bank Service Charges 22.00, credit Cash 22.00. Debit Accounts Receivable 480.00, credit Cash 480.00, because the customer still owes the money.
Check your work: after posting, the ledger cash balance is 9,580.60 + 6.40 − 22.00 − 480.00 = 9,085.00, the adjusted bank balance.
Example 3: adding a bank error and a book transposition error
Facts: Cedar Lane Clinic’s June 30 statement shows 12,475.00 and its ledger shows 11,793.50. Deposit in transit 2,300.00. Outstanding checks 2051 for 2,610.00 and 2054 for 1,250.00. The bank deducted a 185.00 check written by a different customer. The statement shows a 30.00 service fee, 4.50 of interest and a 650.00 NSF customer check. Check 2049 for supplies cleared at 386.00, but the clinic entered it as 368.00.
Solution, bank side: 12,475.00 + 2,300.00 − 3,860.00 + 185.00 = 11,100.00. The 185.00 is added back because the bank took it in error.
Solution, book side: the 368.00 entry understates the payment by 18.00, so the books are 18.00 too high. 11,793.50 + 4.50 − 30.00 − 650.00 − 18.00 = 11,100.00. Difference 0.00.
Journal entries: debit Cash 4.50, credit Interest Income 4.50. Debit Bank Service Charges 30.00, credit Cash 30.00. Debit Accounts Receivable 650.00, credit Cash 650.00. Debit Supplies Expense 18.00, credit Cash 18.00. The bank error needs no entry; ask the bank to reverse it and confirm the reversal on next month’s statement.
Check your work: an unexplained difference that divides evenly by 9 (18.00 here) often points to two transposed digits.
Example 4: items carried from the prior month
Facts: Northgate Landscaping’s June reconciliation listed a 900.00 deposit in transit and outstanding checks 880 for 540.00 and 884 for 1,200.00. On the July statement the 900.00 deposit and check 880 have cleared; check 884 has not. The July 31 statement shows 7,940.00 and the ledger shows 6,625.00. New July items: deposit in transit 1,350.00 and outstanding check 902 for 760.00. The statement also shows a 1,120.00 electronic payment from a customer and a 415.00 automatic loan payment (380.00 principal, 35.00 interest), neither recorded.
Solution, bank side: 7,940.00 + 1,350.00 − (1,200.00 + 760.00) = 7,330.00. Check 884 carries forward because it is still uncleared.
Solution, book side: 6,625.00 + 1,120.00 − 415.00 = 7,330.00. Difference 0.00.
Journal entries: debit Cash 1,120.00, credit Accounts Receivable 1,120.00. Debit Loan Payable 380.00 and Interest Expense 35.00, credit Cash 415.00.
Check your work: tick last month’s outstanding list against this statement first. Items from the prior list that cleared drop off; items that did not clear carry forward. Check 884 has now been outstanding at two month ends, so call the payee. Utah’s state auditor notes that outstanding checks should normally clear in the following month and that old items need research.
Common mistakes these examples avoid
Most wrong answers in practice problems come from a short list of placement errors.
- Putting a deposit in transit or an outstanding check on the book side. Your books already have them.
- Recording a journal entry for a bank error. The bank fixes its own mistakes.
- Adding an NSF check back instead of subtracting it. The bank took the money back out of your account.
- Using a book balance from a different date than the statement ending date.
- Forgetting items still outstanding from last month’s reconciliation.
Doing this with a real statement
Real statements have more rows, but the logic is the same. Get the statement and the ledger into a spreadsheet, match them, and list the leftovers in this format. If your statement is only a PDF, Fulla Ledger can convert it to rows you review against the source page before exporting to Excel or CSV. The bank reconciliation template on this site uses the same two-sided layout.
Sources and documentation
- OpenStax Principles of Accounting: bank reconciliation and its journal entries(opens in a new tab)
- Utah Office of the State Auditor: bank reconciliation(opens in a new tab)
- Washington State Auditor: BARS Cash Manual, bank reconciliations(opens in a new tab)
Follow the source links for original definitions and current product requirements.
Questions about this guide
What is the standard format of a bank reconciliation statement?
Two sections that end at the same number. The bank section starts with the statement ending balance, adds deposits in transit, subtracts outstanding checks and corrects bank errors. The book section starts with the ledger balance, adds interest and collections, subtracts fees, NSF checks and unrecorded payments, and corrects book errors.
Where does an NSF check go on a bank reconciliation?
On the book side, as a deduction. The bank has already removed the money from your account; your books still show the deposit. Record it by debiting Accounts Receivable and crediting Cash.
Where does a bank error go?
On the bank side. Add back money the bank wrongly deducted, or subtract money it wrongly credited, then report the error to the bank. No journal entry is needed.
How do I find the cause when my practice problem does not balance?
Compare the remaining difference with each item. If it equals an item, that item is missing or on the wrong side. If it is twice an item, the sign is reversed. If it divides evenly by 9, look for two transposed digits.
Do outstanding checks from last month go on this month’s reconciliation?
Only if they still have not cleared. Tick last month’s list against the new statement; cleared items drop off and uncleared ones carry forward with the new month’s items.