Your bank app says you have RM8,200. Your accounting records say RM8,950. Which number is right?
Usually, both of them are.
You wrote a cheque for RM750 last week. Your records took the money out the moment you wrote it. The person you gave it to hasn't walked into a bank yet, so your bank still shows it sitting in your account.
Nothing is missing. Nothing is wrong. The two records are just looking at the same money on different days.
Bank reconciliation is how you prove that. You go through both records, explain every difference, and show that once you account for the things each side hasn't seen yet, they agree.
What is bank reconciliation?
Bank reconciliation is the process of comparing your own accounting records against your bank statement to explain every difference between them. Once the differences are identified and your books are adjusted, both balances should agree.
This page shows you why the two numbers drift apart, what to do about it, and gives you a free template that does the arithmetic for you. No accounting background needed.
Bank reconciliation in 30 seconds
Everything below is just detail on these four steps.
01. What bank reconciliation actually does for you
Forget the definition for a second. Here is what it buys you.
- You find out your cash number is real. The money in the bank is the easiest figure in your business to check, and the most embarrassing to get wrong in front of an accountant or a partner.
- You find out what the bank did without telling you. Charges, a standing instruction that went out, a customer's cheque that bounced. You learn about these from the statement, never from your own records.
- You get an answer ready. When someone asks "is the cash figure right?", you have a page that proves it instead of a shrug.
It is a reconciliation, not a correction. You are not forcing one number to match the other. You are explaining the gap, then fixing the handful of things that genuinely belong in your books.
02. Why the two balances never match
Why doesn't my bank balance match my books?
The usual reasons are cheques you have written that nobody has cashed yet, money you banked that the bank hasn't credited yet, charges and interest the bank added without telling you, payments the bank made automatically, a customer's cheque that bounced, or a typing mistake in your own records.
There are only four kinds of difference. Every reconciling item you will ever meet is one of them. Here they are as situations first, names second.
1. You paid someone, but they haven't cashed it. You wrote a cheque to your supplier on the 28th. You recorded it that day, so your books already show the money as gone. Your supplier put the cheque in a drawer. Until they bank it, your bank still shows the money. Accountants call this an unpresented cheque.
2. You banked money, but it hasn't landed. You dropped the weekend takings in on Saturday. Your cash book shows it straight away. The bank only processes it on Monday, so it lands on next month's statement. That is a deposit in transit.
3. The bank moved money without telling you. A RM35 service charge. The insurance premium that goes out automatically every month. Interest they added. You didn't write any of it down, because nobody told you to. These are bank-originated items, and they include a customer's cheque that bounced — a dishonoured cheque.
4. Somebody typed it wrong. RM1,890 entered as RM1,980. A payment keyed in twice. Occasionally the bank itself posts something to the wrong account. These are simply errors.
| The situation | What it's called | Who is behind | Fixes itself? |
|---|---|---|---|
| You wrote a cheque; nobody cashed it | Unpresented cheque | The bank | Yes — leave it |
| You banked money; it hasn't landed | Deposit in transit | The bank | Yes — leave it |
| Charges, interest, auto-payments, bounced cheques | Bank-originated items | Your books | No — record it |
| A wrong or duplicated figure | Error | Either side | No — fix it |
This is the one distinction that matters. The first two sort themselves out if you do nothing. The last two do not — they need an entry in your books, or a phone call to the bank. Mixing these up is why some people's reconciliation never comes right.
Don't worry if your two balances are miles apart the first time. That is normal. Almost every business finds several differences on its first reconciliation, and a difference does not mean somebody took your money — it nearly always means a charge went unrecorded or a cheque hasn't been cashed.
03. What this looks like in a real business
The same four causes, in four ordinary Malaysian businesses.
| Business | What happened | Why the balances disagree |
|---|---|---|
| Restaurant | A customer settled a RM580 bill by transfer late on Sunday night. The cash book shows it. Monday's bank statement doesn't. | The bank processed it the next working day. Deposit in transit — it will appear on its own. |
| Printing shop | Salaries went out by transfer. The owner recorded the salaries but not the RM12 transfer fees the bank took on top. | The bank charged a fee nobody wrote down. Bank charge — this one has to be entered into the books. |
| Contractor | A client handed over a cheque for RM6,400 three weeks ago. It was recorded as received. The bank balance never moved. | Nobody banked it. Chase the cheque — and if it has been sitting past six months, it may no longer be good. |
| Retail shop | Friday, Saturday and Sunday takings were all banked together on Monday the 1st. The month's books show three days of sales the statement doesn't. | Banked after the month-end cut-off. Deposit in transit again — and the reason weekend businesses should reconcile weekly. |
Notice the pattern. Two of these four need no action at all. One needs an entry in the books. One needs a phone call. That is the whole job.
04. The bank reconciliation format, field by field
The standard format starts from the bank statement balance and works towards your book balance. (Some textbooks run it the other way round. Both are correct — pick one and stay consistent.)
| Line | What goes in it | Effect |
|---|---|---|
| Balance as per bank statement | The closing balance printed on the statement | Starting point |
| Add: Deposits in transit | Money you banked that hasn't been credited yet | + |
| Less: Unpresented cheques | Cheques you've written that haven't been cashed | − |
| = Adjusted bank balance | What the bank balance would be if it were up to date | Target figure |
| Balance as per cash book | The closing balance in your own records | Second starting point |
| Less: Bank charges and fees | Service charges, cheque book fees, transfer fees | − |
| Less: Standing instructions / direct debits | Payments the bank made automatically | − |
| Less: Dishonoured cheques | Customer cheques that bounced | − |
| Add: Interest and direct credits | Interest earned, or money paid straight into your account | + |
| = Adjusted cash book balance | Your book balance brought up to date | Must equal the adjusted bank balance |
The last line is the whole point. If the two adjusted balances are equal, the account is reconciled. If they are not, the difference is the amount you still have to find.
05. Download the free bank reconciliation template
Free, no sign-up, ringgit-ready. The Excel version does the arithmetic and tells you the moment the two sides agree.
Type in your figures; the totals calculate themselves and a status cell tells you when it reconciles. Includes the worked example and a how-to sheet.
Excel ↓The standard layout on one A4 page, print-ready. File it behind the bank statement it belongs to.
PDF ↓The same format completed with the worked example below, so you can see what a finished one looks like.
PDF ↓Free · No sign-up · RM-ready · Works on your phone or PC.
06. A worked example, line by line
Imagine this is your business at the end of August.
Your accounting records say you have RM25,041.10. You open your bank app and it says RM24,318.60. You are missing RM722.50.
For about ten seconds it looks like somebody made a mistake, or worse. Then you go through it, and it turns out nothing is wrong at all. Here is exactly what happened.
Start with the bank's number
Two things the bank hasn't caught up on: money you banked on the 30th, and two cheques you wrote that nobody has cashed.
| Line | RM |
|---|---|
| Balance as per bank statement, 31 August 2026 | 24,318.60 |
| Add: Deposit in transit — banked 30 August, credited 1 September | 3,150.00 |
| Less: Unpresented cheque 100482 — Kilang Plastik Seri Maju | (1,860.00) |
| Less: Unpresented cheque 100485 — Syarikat Hardware Tan | (742.50) |
| = Adjusted bank balance | 24,866.10 |
Now your own number
Three things the bank did that you never wrote down: a service charge, the insurance that goes out automatically, and a little interest they paid you.
| Line | RM |
|---|---|
| Balance as per cash book, 31 August 2026 | 25,041.10 |
| Less: Bank charges — monthly service and transfer fees | (35.00) |
| Less: Standing instruction — fire insurance premium | (180.00) |
| Add: Interest credited by the bank | 40.00 |
| = Adjusted cash book balance | 24,866.10 |
Both sides land on RM24,866.10. The account is reconciled, and the RM722.50 is fully explained.
Now the step people skip. The deposit and the two cheques need nothing — they clear on their own. But the RM35, the RM180 and the RM40 are real money that moved and never made it into your records. Those three go into your cash book today. Next month they will already be there.
What if a customer's cheque bounced? Same idea as the bank charges. The bank has taken back money you already recorded as received, so it comes off your book balance — and that customer goes back on your list of people who still owe you against their original invoice.
07. The five steps to prepare one
You will see this described as four steps, five steps or seven steps depending on who wrote it. The work is identical; only the chopping differs.
- Get the two closing balances. The bank statement closing balance, and your own balance on the same date. They must be the same date or nothing will agree.
- Tick off everything that matches. Go line by line through the statement against your records. Most entries appear on both sides — tick them and move on.
- List what's only on the bank statement. Charges, interest, standing instructions, bounced cheques. These are the things your records haven't seen.
- List what's only in your records. Cheques you've written that nobody cashed, and money you banked that hasn't landed.
- Build the statement and update your books. Work both sides to the adjusted balance. Then record the bank's items — step 5 isn't finished until your books are corrected.
How long does this take? For a small business with one account and a few dozen transactions a month, about twenty minutes once you've done it twice. Your first one will take longer, and that's expected — the first time is when you find the things that have been wrong for months.
08. The words accountants use, in plain English
Malaysian and Commonwealth bookkeeping uses different words from the American guides you'll find online. Same things, different names.
| If this happened… | …the word for it is | Americans say |
|---|---|---|
| You wrote a cheque and nobody has cashed it yet | Unpresented cheque | Outstanding check |
| You banked money and it hasn't shown up yet | Deposit in transit | Uncleared lodgement |
| The bank took a fee off your account | Bank charges | Service charges |
| The bank pays something for you every month automatically | Standing instruction | Direct debit |
| A cheque you paid in was refused by the payer's bank | Dishonoured cheque | Bounced cheque |
| Your own record of money in and out of the bank | Cash book | Bank ledger |
So if a guide tells you to look for “outstanding checks”, it means the cheques you wrote that nobody has cashed. Nothing more complicated than that.
09. Doing it in accounting software
The format above is what any accounting system is doing behind the screen.
- In a desktop system such as AutoCount or SQL Account, reconciliation is usually a screen where you tick off transactions against the statement, and whatever stays unticked becomes your reconciling items.
- In a cloud system, the same job is done from any device, and whoever is working on the books can see the reconciliation status — instead of it living on one PC in the office.
The thinking is the same everywhere. You are still matching your records against the statement and explaining what's left over. What changes is how much of the ticking and adding is done for you, and who can get at the file.
If you're reconciling on paper today, the template above is the right place to start. Software earns its keep at the point where ticking lines is eating a morning every month.
10. When it won't balance, and how to find it
Work down this list in order. It is roughly the order of how common the causes are, so you usually stop early.
It doesn't balance — what to check, in order
Most differences are found at Check 1 or Check 2.
The eight mistakes that cause most of it
| The mistake | What it looks like | The fix |
|---|---|---|
| 1. Different dates | Statement to the 31st, records to the 28th | Both balances must be the same date |
| 2. Ignoring bank charges | Small amounts on the statement you never wrote down | Enter every charge into your records, every month |
| 3. Forgetting the automatic payments | Insurance or a loan instalment goes out on its own | List every standing instruction once, then check for them each month |
| 4. A transposed figure | The difference divides exactly by 9 | You typed 1,890 as 1,980 somewhere. The 9 test finds it fast |
| 5. An entry recorded twice | The difference is exactly double a transaction you can see | Search your records for the amount; delete the duplicate. A numbered payment voucher per payment makes duplicates obvious |
| 6. Editing a month you already reconciled | An old month that used to balance suddenly doesn't | Once a month is reconciled and filed, leave it. Corrections belong in the current month |
| 7. Assuming a difference means fraud | Panic on the first reconciliation | Work the list first. Nearly every difference is timing or an unrecorded charge |
| 8. Never posting the adjustments back | It balances on paper but drifts every single month | Charges and standing instructions must be entered into your records, not just listed |
Number 8 is the most common of the lot. The reconciliation gets treated as a monthly form to fill in rather than something that changes the accounts — so the same charges get listed again and again, and the book balance is permanently wrong.
The same difference tests work one level up, too. If it is the whole trial balance that won't tally rather than just the bank line, the ÷9 and ÷2 checks are the place to start there as well.
11. How often should you reconcile?
How often should I reconcile my bank account?
Most small businesses should reconcile at least once a month, timed to when the bank statement arrives. Businesses that bank takings daily or write cheques regularly are safer reconciling weekly.
| Your situation | How often | Why |
|---|---|---|
| A freelancer or a shop with a handful of payments a month | Monthly is plenty | The statement arriving is your reminder. Don't over-engineer it |
| Daily takings banked, or cheques written regularly | Weekly | Finding a problem four weeks late means four weeks of wrong figures |
| More than one bank account | Monthly, every account, same date | An unreconciled account is where mistakes go to hide |
| Year end coming, or an audit | Monthly without fail, and keep the file | This is the first thing an auditor asks for |
You don't need to do this daily, and you don't need software to start. A monthly reconciliation on a printed template is completely respectable for a small business, and it is far better than a system nobody keeps up with. If your accounting system pulls in your bank transactions for you, the matching gets much faster — but somebody still has to look at what it matched, because a system can pair up two similar amounts that were never actually the same payment.
The honest rule: reconcile whenever you'd be uncomfortable being asked “is the cash figure right?” For most small businesses that means monthly — and it means never leaving two months unreconciled, because after that you can't tell which month the problem is in.
The bank account isn't the only cash worth checking, either. The petty cash float gets counted against its vouchers on the same rhythm — same idea, smaller numbers, no statement to help you.
12. Doing it without ticking lines by hand
Reconciling on paper works. It just doesn't scale, and it fails in one specific way: the reconciliation gets done, but the bank charges and standing instructions never make it back into the records — so the book balance quietly drifts away from reality.
Doing it inside your accounting system closes that loop, because the adjustments you find are the entries. There's no second step to forget.
Niagawan Plus includes bank reconciliation alongside financial reports, AR/AP aging, sales and expense analytics, digital invoicing and automatic tax and zakat reports. It is RM497 a year with three Niagawan Accounting User IDs, built for Malaysian businesses — ringgit, SST and e-Invoice handled — and used by more than 40,000 businesses since 2016.
Whichever way you do it, keep the finished statement filed behind the bank statement it belongs to. That folder is what turns “I think the cash is right” into something you can actually show someone.
Bryant Gan is the Founder of Niagawan — the cloud accounting and POS system used by more than 40,000 businesses in Malaysia since 2016. He has spent over 10 years building software that helps Malaysian SMEs keep their books, stock, and tax records in order.
Frequently asked questions
What is bank reconciliation?
Bank reconciliation means checking whether your accounting records and your bank statement tell the same story. Where they don't, you find out why — then adjust your records so both balances agree.
What is the format for bank reconciliation?
Start with the bank statement balance. Add money you banked that hasn't landed yet, subtract cheques you wrote that nobody has cashed. That gives you the adjusted bank balance. Then start with your own balance, subtract bank charges, automatic payments and any bounced cheques, add interest. That gives you the adjusted book balance. The two must be equal. Section 04 has every line, and the blank format is free to download.
Why doesn't my bank balance match my books?
Usually because of cheques you wrote that nobody has cashed, money you banked that hasn't landed yet, charges or interest the bank added without telling you, a payment the bank makes automatically, a customer's cheque that bounced, or a typing mistake. A difference almost never means money is missing.
How do you prepare a bank reconciliation?
Take both balances on the same date. Tick off everything that appears in both records. List what only the bank knows about, and what only you know about. Work both sides down to an adjusted balance. Then enter the bank's items into your records — the job isn't done until you do.
What are the 5 steps of bank reconciliation?
Get both closing balances for the same date; tick off matching transactions; list bank-only items such as charges and interest; list book-only items such as uncashed cheques and deposits that haven't landed; then prepare the statement and post the adjustments into your records. Guides that say four or seven steps are dividing up the same work.
What is an example of a bank reconciliation?
Your records say RM25,041.10 and your bank says RM24,318.60. Add back RM3,150.00 you banked on the 30th, take off two cheques of RM1,860.00 and RM742.50 that nobody has cashed, and the bank side becomes RM24,866.10. On your side, take off RM35.00 of charges and a RM180.00 insurance payment, add RM40.00 of interest — also RM24,866.10. It reconciles. Section 06 walks through it.
What is an unpresented cheque?
You already gave someone a cheque, and they haven't deposited it yet. Your records show the money as gone. Your bank hasn't taken it out yet. Nothing to fix — it sorts itself out when they finally bank it.
What is a deposit in transit?
You paid money into the bank, but it hasn't shown up on the statement yet — usually because you banked it after the last working day of the month. Like an uncashed cheque, it corrects itself.
My reconciliation won't balance. What do I do?
Check both balances are for the same date. Then check you've listed bank charges, deposits in transit, uncashed cheques and automatic payments. Then look at the difference itself: if it divides exactly by 9 you've transposed a figure, and if it's exactly double something you can see, you've either recorded it twice or added it when you should have subtracted it. Still stuck? Check last month balanced.
Does a difference mean someone stole money?
Almost never. The overwhelming majority of differences are timing — a cheque not yet cashed, a deposit not yet landed — or a bank charge nobody wrote down. Work through the list first; genuine theft is rare and usually shows up as a payment you cannot identify at all.
Do bank charges go on the reconciliation or in my books?
Both, in that order. They go on the reconciliation because your records haven't caught them yet, and then they must be entered into your records. If you only ever list them, your book balance stays permanently wrong.
Can I do a bank reconciliation in Excel?
Yes. For a small business with one account it is perfectly adequate, and the free Excel template on this page has the format and the arithmetic already built in. The one limitation is that whatever you find still has to be entered into your accounts separately.
How often should a small business reconcile its bank account?
Monthly at minimum, timed to the statement arriving. Weekly if you bank takings daily or write cheques often. The rule that really matters: never leave two months unreconciled, because after that you can't tell which month the mistake is in.
Is a bank reconciliation statement part of the financial statements?
No. It is an internal working paper, not something you publish. It backs up the cash figure that does appear in your accounts, which is why auditors ask to see it.