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Worked example
Bank reconciliation, worked through a cafe
Your own cash records and the bank statement rarely match to the penny, and both can be right. A bank reconciliation explains the gap. Here it is worked step by step through a cafe.
Updated September 2026 · 6 min read
Your cash book says one balance; the bank statement says another. That does not mean anyone has made a mistake: some items reach one record before the other. A bank reconciliation is the two-part exercise that explains the difference, and it is a staple of the early ACCA papers. Let us work it through.
Why the two differ
There are two reasons the balances disagree. First, things the business has not recorded yet: bank charges, direct debits and interest often appear on the statement before they are entered in the cash book. Second, timing differences: cheques written but not yet cashed (unpresented), and money paid in but not yet cleared (outstanding lodgements). You fix the first by correcting the cash book, and you explain the second in a reconciliation statement.
The scenario
Willow Lane Cafe's cash book shows a balance of £2,450, but the bank statement shows £2,860. On investigation: the statement includes bank charges of £40 and a direct debit of £100 that are not in the cash book, plus £20 of interest the cafe has not recorded. There are also unpresented cheques of £780 and an outstanding lodgement of £250.
Step 1: correct the cash book
First, bring the cash book up to date for the items the cafe simply had not recorded yet.
Step 2: reconcile the bank statement
Now explain the remaining gap with the timing differences. Unpresented cheques will reduce the bank balance once they clear; the outstanding lodgement will increase it.
Both routes arrive at £2,330, so the reconciliation is complete. The trick is knowing which items fix the cash book (charges, direct debits, interest, and any errors the business made) and which explain the statement (unpresented cheques and outstanding lodgements, which are only timing). Adjust the cash book, reconcile the statement, and they meet in the middle.
Where this comes up in ACCA
Bank reconciliation is core to Financial Accounting (FA), and the control-account and reconciliation thinking it builds carries into later papers. It is a reliable source of marks precisely because the method is always the same. It sits alongside the other FA basics such as double-entry bookkeeping.
The best way to make it automatic is to work reconciliations, not read about them. The free ACCA FA course on Clevernest teaches bank reconciliation inside a real business, with hands-on exercises as you go.
Learn the FA basics free on ClevernestWork bank reconciliations, control accounts and the full set of financial statements inside a real business. The whole ACCA FA course, free forever.
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Frequently asked questions
What is a bank reconciliation?
A bank reconciliation is a check that explains the difference between the balance in a business's cash book and the balance on its bank statement. You correct the cash book for items not yet recorded, then reconcile the statement for timing differences, until the two agree.
Why do the cash book and bank statement differ?
For two reasons: items recorded by the bank but not yet by the business, such as charges, direct debits and interest; and timing differences, such as unpresented cheques and outstanding lodgements that have gone through one record but not yet the other.
Which items adjust the cash book?
Items the business has not yet recorded: bank charges, direct debits and standing orders, interest, dishonoured cheques, and any errors the business itself made. In our example, £40 charges and £100 direct debit are deducted and £20 interest is added.
What are unpresented cheques and outstanding lodgements?
Unpresented cheques are cheques the business has written and recorded but the recipient has not yet banked, so they have not left the bank balance. Outstanding lodgements are amounts paid in and recorded but not yet cleared by the bank. Both are timing differences shown in the reconciliation statement, not cash-book adjustments.
Where is bank reconciliation tested in ACCA?
It is core to Financial Accounting (FA), both as its own question and within larger tasks, and the reconciliation and control-account thinking it builds is used again in later papers.