Bank Reconciliation Example (Step-by-Step)
By BankStatementReader Team ·
The clearest way to learn reconciliation is to watch one balance out, line by line. This post walks through a complete bank reconciliation example: we start with two ending balances that disagree, identify each reconciling item, and adjust both sides until they meet at the same number. If you want the concept first, read what is a bank reconciliation, then come back here for the worked numbers.
The starting figures
At the end of the month, our small business has two cash figures that do not match:
- Bank statement ending balance: $12,400.00
- Book (cash account) balance: $11,550.00
The gap is $850. That difference is not an error by itself — it is the sum of timing differences and items only one side knows about yet. Our job is to explain every dollar of it.
The reconciling items
After comparing the statement against the cash ledger, we find four items:
- Deposit in transit — $2,000.00. A customer payment we recorded in our books on the last day of the month, but the bank had not posted by the statement date.
- Outstanding checks — $2,800.00. Two checks we wrote and recorded (one for $1,800, one for $1,000) that the payees have not yet cashed, so the bank has not paid them out.
- Bank service fee — $35.00. A monthly account fee the bank deducted that we had not recorded in our books.
- Interest earned — $85.00. Interest the bank credited to the account that we had not recorded in our books.
Which side does each item adjust?
The rule is: adjust the side that does not yet know about the item.
- A deposit in transit is money already in our books but not yet on the statement, so the statement is temporarily too low — add it to the bank side.
- Outstanding checks are money already deducted in our books but not yet paid by the bank, so the statement is temporarily too high — subtract them from the bank side.
- A bank fee is money the bank already took that we never recorded — subtract it from the book side.
- Interest earned is money the bank already added that we never recorded — add it to the book side.
Step 1: Adjust the bank side
Start from the bank statement balance and apply only the items the bank does not yet reflect (the deposit in transit and the outstanding checks):
| Bank side | Amount |
|---|---|
| Bank statement ending balance | $12,400.00 |
| Add: deposit in transit | + $2,000.00 |
| Less: outstanding checks | − $2,800.00 |
| Adjusted bank balance | $11,600.00 |
Check: 12,400 + 2,000 − 2,800 = $11,600.00.
Step 2: Adjust the book side
Now start from the book balance and apply only the items our books do not yet reflect (the service fee and the interest):
| Book side | Amount |
|---|---|
| Book (cash account) balance | $11,550.00 |
| Add: interest earned | + $85.00 |
| Less: bank service fee | − $35.00 |
| Adjusted book balance | $11,600.00 |
Check: 11,550 + 85 − 35 = $11,600.00.
Step 3: Confirm both sides agree
| Side | Adjusted balance |
|---|---|
| Adjusted bank balance | $11,600.00 |
| Adjusted book balance | $11,600.00 |
Both sides land on $11,600.00. The reconciliation is complete. That matching figure is the true cash balance — the amount that survives once timing differences clear and the unrecorded items are booked.
Step 4: Record the book-side adjustments
The bank-side items (deposit in transit, outstanding checks) need no journal entry — they simply clear on a later statement. But the two book-side items were real cash events the bank already processed, so they belong in your records now:
- Record $85.00 of interest income.
- Record the $35.00 bank service fee as an expense.
After posting those two entries, your book balance moves from $11,550.00 to $11,600.00, matching the reconciled figure on its own.
Why the difference resolved exactly
The original $850 gap breaks down cleanly:
- Bank side net change: +2,000 − 2,800 = −800
- Book side net change: +85 − 35 = +50
The book balance started $850 below the bank balance. Lowering the bank side by $800 and raising the book side by $50 closes that gap exactly: the two sides move toward each other by $800 + $50 = $850, the same amount they began apart, so both end up meeting at $11,600.00. Every reconciling item is explained, with nothing left over — which is exactly the outcome you want.
Doing this with your own statement
The hardest part of any reconciliation is not the arithmetic — it is lining up dozens of transactions between a PDF statement and your ledger. That is far easier once the statement rows are in a spreadsheet you can sort and filter. You can turn a PDF statement into clean rows with the free bank statement converter, then match line by line and adjust each side the same way we did above.
Once your transactions are structured, a monthly reconciliation becomes a short, repeatable checklist: list the items only one side knows about, adjust the correct side for each, and confirm both balances meet at one number.
Related reading
What Is a Bank Reconciliation? Definition & Example
A plain-English explanation of bank reconciliation — what it is, why it matters, and a simple worked example matching your books to your bank statement.
How to Undo a Bank Reconciliation in QuickBooks Online
How to undo a bank reconciliation in QuickBooks Online — why you'd revert a reconciled period, the general approach, and how to avoid the re-work next time.
How to Do a Bank Reconciliation in 6 Steps
Learn how to do a bank reconciliation in 6 clear steps — match transactions, handle outstanding checks and bank fees, and confirm both sides agree.