What is a bank reconciliation statement?

It is a document that explains the difference between the balance on your bank statement and the cash balance in your accounting records on a given date, listing each adjustment such as deposits in transit, outstanding checks, bank fees, and interest until both balances agree.

What is the format of a bank reconciliation statement?

The standard format starts with the balance per the bank statement, adds deposits in transit and subtracts outstanding checks, then takes the balance per the books, adds interest and subtracts bank charges, so the adjusted bank balance equals the adjusted book balance.

How do you prepare a bank reconciliation statement?

Enter both starting balances as of the same date, adjust the bank balance for deposits in transit and outstanding checks, adjust the book balance for interest and bank charges, correct any recording errors, and confirm the two adjusted totals match.

Which items adjust the book balance versus the bank balance?

Deposits in transit and outstanding checks adjust the bank balance because the company already recorded them. Bank fees, interest, direct deposits, and automatic payments adjust the book balance because the bank posted them before the company recorded them.

What is the difference between a bank reconciliation statement and a bank statement?

A bank statement is the bank's record of transactions for a period. A bank reconciliation statement is a separate document you prepare that reconciles that bank record against your own accounting balance and explains every difference.

Do bank-side adjustments require journal entries?

No. Deposits in transit and outstanding checks are timing differences already in your books, so they need no entry. Only book-side items like fees and interest become journal entries, because those are the transactions your records were missing.

Bank Reconciliation Statement: Format & Example

A bank reconciliation statement is the document that explains why the balance on your bank statement differs from the cash balance in your accounting records on a specific date. It is not the act of checking the figures, which is reconciliation; it is the written schedule that lists each adjustment and proves the two balances are really the same once timing differences and errors are accounted for. Accountants prepare one per account per period and keep it as evidence that the recorded cash figure is accurate.

It is a document, not a process. The reconciliation is the work; the bank reconciliation statement is the output you file.
Two starting figures: the balance per bank statement and the balance per books, as of the same date.
Four adjustment types: deposits in transit and outstanding checks adjust the bank side; bank charges and interest or direct credits adjust the book side.
The proof: when the adjusted bank balance equals the adjusted book balance, the statement is complete and balanced.
Both formats reach the same answer: you can reconcile from the bank balance to the book balance, or adjust both to a single corrected figure.

The standard format of the statement

The most common format starts with the balance per the bank statement and works toward the balance per the books, applying four adjustment lines. Deposits in transit and outstanding checks correct the bank's figure for timing; bank charges and interest correct the book figure for items the company had not yet recorded. The layout is deliberately simple so anyone reviewing it can follow the logic from one balance to the other.

Line	Side adjusted	Add or subtract	Reason
Balance per bank statement	Bank	Starting figure	The bank's reported closing balance
Add: deposits in transit	Bank	Add	Recorded by the company, not yet posted by the bank
Less: outstanding checks	Bank	Subtract	Written by the company, not yet cleared
Balance per books	Books	Starting figure	The cash balance in the ledger
Add: interest earned	Books	Add	Credited by the bank, not yet recorded
Less: bank charges and fees	Books	Subtract	Deducted by the bank, not yet recorded

When you adjust both columns this way, the corrected bank balance and the corrected book balance land on the same number, which is the whole point of the document.

A worked example with real figures

Here is a complete example for a small business at month end. The bank statement shows a closing balance of 8,420 and the company ledger shows 7,650. The difference of 770 is fully explained by four items: a 1,200 deposit in transit, 1,850 in outstanding checks, 30 in bank fees, and 50 of interest earned. Once each is applied to the correct side, both columns reconcile to 7,770.

Bank side	Amount	Book side	Amount
Balance per bank statement	8,420	Balance per books	7,650
Add: deposit in transit	+1,200	Add: interest earned	+50
Less: outstanding checks	-1,850	Less: bank service fee	-30
Adjusted bank balance	7,770	Adjusted book balance	7,770

Both adjusted figures equal 7,770, so the account reconciles. The adjusted book balance, 7,770, is the true cash position that should appear on the balance sheet. After preparing this, the company posts journal entries for the 50 interest and the 30 fee so its ledger catches up to the bank; the deposit in transit and outstanding checks need no entry because they were already recorded and will clear on their own.

Two ways to present the same reconciliation

There are two accepted formats, and they reach the identical result by different routes. The first is the adjusted-balance method shown above, where you correct both the bank balance and the book balance and prove they meet at a single figure. The second is the bank-to-book method, where you start from the bank balance and apply every adjustment in sequence until you arrive directly at the book balance, with no second column.

Format	How it works	Best for
Adjusted-balance method	Correct both sides separately; prove they meet at one figure	Most businesses; clearest audit trail
Bank-to-book method	Start at the bank balance, apply each item, end at the book balance	Quick checks and exam-style presentation
Book-to-bank method	Start at the book balance and work toward the bank balance	When the ledger figure is the trusted anchor

The adjusted-balance method is the most common in practice because the two-column layout makes it obvious which side each item corrects and gives a reviewer a clean figure to verify against the balance sheet. Whichever format you choose, the underlying logic is unchanged: timing differences sit on the bank side, unrecorded bank activity sits on the book side, and the corrected balances must agree. Choosing a format is a presentation decision, not an accounting one, so a firm typically standardizes on one and applies it to every account for consistency.

Why both sides need adjustment

The two columns get adjusted for different reasons, and understanding why keeps you from putting an item on the wrong side. The bank side is adjusted for things the company already knows but the bank does not yet show. The book side is adjusted for things the bank already shows but the company has not yet recorded.

Item	Who knew first	Goes on which side
Deposit in transit	Company recorded it	Bank side (add)
Outstanding check	Company recorded it	Bank side (subtract)
Interest earned	Bank credited it	Book side (add)
Service fee or NSF charge	Bank deducted it	Book side (subtract)
Direct deposit or auto-collection	Bank posted it	Book side (add)
Auto-payment or standing order	Bank posted it	Book side (subtract)

Only the book-side items become journal entries, because those are the transactions your records were missing. Bank-side items are timing differences that resolve themselves once the deposit posts or the check clears.

What the statement actually proves

It validates the cash account. The adjusted book balance is the figure that belongs on the balance sheet. A reconciliation that ties out is the support behind that number.
It is an internal control. Separating the person who reconciles from the person who handles cash is a standard control because the reconciliation is where misappropriation tends to surface as an unexplained gap.
It creates an audit trail. A signed, dated bank reconciliation statement with the supporting bank statement attached is the documentation auditors and lenders ask to see for cash.

How to prepare one without errors

Preparing a clean statement is mostly about working in a fixed order and using the prior period as your anchor. Start from last month's reconciled balance, bring forward items that were still outstanding, then layer in this period's differences. Skipping the carry-forward is the most common reason a statement looks balanced but hides a stale error.

Confirm the bank statement's opening balance equals last period's adjusted bank balance.
Carry forward any prior outstanding checks or deposits in transit and check whether they cleared this period.
Identify this period's new deposits in transit and outstanding checks.
List bank-only items: fees, interest, direct credits, and automatic payments.
Apply each adjustment to the correct side and confirm both columns reconcile to one figure.

For the full hands-on walkthrough of comparing the statement to your ledger line by line, see our guide on how to reconcile a bank statement.

How statement layouts shape the worksheet

From normalizing statements across hundreds of bank templates, the structure of the source statement directly affects how easily a reconciliation statement comes together. Statements that carry a running balance column let you spot a missing transaction instantly, because the balance jumps by an amount with no matching line. Statements that show only debit and credit columns with no running balance hide that signal, so errors are harder to localize. A second pattern: banks that post deposits and the matching fee on the same day in a single net line force you to gross the figures back up before they map onto the add and subtract lines of the worksheet. Converting the statement to a spreadsheet with an added running-balance formula recreates the missing signal and makes both issues visible at a glance.

From PDF statement to a reconciliation you can build

The worksheet is only as easy as your access to the underlying data. Converting the bank statement to Excel turns each transaction into a row you can sort, total, and tag as cleared or outstanding, which is exactly the raw material a bank reconciliation statement is built from. With the statement in spreadsheet form, the deposits in transit and outstanding checks practically identify themselves.

What Is a Bank Reconciliation Statement?