Two records of the same account
A business keeps its own record of its bank account, called the ledger, cash book or books, and the bank keeps another, which it summarises on the statement. Both are meant to describe the same cash, but they are written at different times by different people, so the ending balances often differ. That difference is normal and does not by itself mean something is wrong.
The SUNY Financial Accounting course material on preparing a bank reconciliation, which is published by Lumen Learning, explains the usual causes. SBA's small business guidance also lists bank reconciliation among the finance tasks someone in a business should manage.
This article is general information, not tax, legal or financial advice. It explains terms from an accounting course, and your accountant or bookkeeper can advise on your own records.
The common reasons the balances differ
The course material describes these items:
• Deposits in transit. It describes a deposit in transit as typically a day's cash receipts recorded in the depositor's books in one period, while the bank records the deposit in the following period. The business has recorded the money, but the bank statement does not show it yet.
• Outstanding checks. It describes these as checks issued by a depositor but not paid by the bank on which they are drawn. The business has already recorded the payment, but the check has not cleared.
• Bank fees and similar charges. It says debit memos reflect deductions for items such as service charges. The bank has deducted them, so the business has to record them in its own books.
• Errors. It notes that banks sometimes make errors by depositing or taking money out of an account in error, and that a common error by depositors is recording a check in the accounting records at an amount that differs from the check.
The first two are timing differences and sort themselves out when the bank processes the items. Fees and errors need action: the business records the fees, corrects its own mistakes, and contacts the bank about the bank's mistakes.
A synthetic worked example
The figures below are made up for illustration. Suppose the statement closing balance is 12,480.00 and the ledger balance is 11,905.00.
Statement closing balance 12,480.00
+ Deposit in transit (recorded, not yet at bank) 1,200.00
- Outstanding check no. 1042 (650.00)
- Outstanding check no. 1045 (325.00)
= Adjusted bank balance 12,705.00
Ledger balance 11,905.00
+ (other ledger adjustments, if any)
- Monthly account fee not yet recorded (25.00)
+ Ledger entry error found (check recorded too low) 825.00
= Adjusted ledger balance 12,705.00In this example both sides end at 12,705.00, which is the point of the exercise: the adjusted bank balance and the adjusted book balance should agree once the reconciling items are listed. In the made-up numbers, 12,480.00 + 1,200.00 - 650.00 - 325.00 = 12,705.00 and 11,905.00 - 25.00 + 825.00 = 12,705.00.
How a spreadsheet helps
If you convert a statement PDF to a spreadsheet, you can put the bank rows next to the rows from your accounting software and match them by amount and date. Items on your ledger that have no match in the bank rows are candidates for deposits in transit or outstanding checks. Items on the bank side with no ledger match are candidates for fees, bank-initiated entries or unrecorded transactions.
A simple layout is one sheet for the bank rows, one for the ledger rows, a Matched column on each with TRUE or FALSE, and a third sheet listing the unmatched items by type. Converting does not perform the reconciliation for you, and it does not replace your accounting software. It only saves retyping the statement so you can spend the time on the matching.
Compare dates carefully. A deposit made late in the month may be in the ledger in one month and on the bank statement in the next. Also keep the original statement, since it is the bank's record.
Checklist
• Start from the statement closing balance and the ledger balance on the same date.
• List deposits in transit and outstanding checks and adjust the bank side.
• Record bank fees and correct any errors on the ledger side.
• Confirm the two adjusted balances agree. If they do not, look for a transposed amount or a missing item.
PDFtoRow can convert statement PDFs to Excel or CSV to help with the matching.
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Frequently Asked Questions
The SUNY course material describes it as typically a day's cash receipts recorded in the depositor's books in one period, with the bank recording the deposit in the following period, so it is not yet on the bank statement.
The course material describes outstanding checks as checks issued by a depositor but not paid by the bank on which they are drawn. They are recorded by the business but have not cleared the bank.
The course material says debit memos reflect deductions for items such as service charges. The bank has already deducted them, so the business needs to record them in its own books.
Primary Evidence & Official References
- Preparing a bank reconciliation — courses.lumenlearning.com (Verified 2026-10-29). Official source documentation →
- Manage your finances — sba.gov (Verified 2026-10-29). Official source documentation →