Bank reconciliation: prove the balance and explain every movement

Assemble the month’s bank proof

Use the complete statement or authoritative bank export, the opening ledger balance, all recorded movements and the closing ledger balance. Confirm the account, currency, period and date basis.

For one fictional company, account A opens September at €20,000. Its statement contains:

The statement closes at €22,550: €20,000 + €10,000 − €7,450.

Account B opens at €5,000 and receives the €2,000 transfer. Its closing statement balance is €7,000. Across both accounts, bank assets total €29,550.

Reconcile the ledger and locate the difference

Suppose account A’s ledger shows €22,600. The bank statement is €50 lower.

Comparing the seven statement movements with the recorded bank entries shows that the €50 fee is missing. The other six movements are present once, including the €100 card purchase.

After the fee is recorded with the appropriate supporting bank evidence, the ledger closes at €22,550. The numerical difference is zero. The reconciliation note should identify the missing movement and its correcting entry, rather than merely state “difference cleared.”

If all movements agree but the closing difference remains, compare opening balances next. A €50 error brought forward cannot be solved by inventing a current-month fee.

Prove the transfer across both accounts

Account A contains a €2,000 outflow; account B contains a €2,000 inflow. The account holders, references and dates identify the same internal transfer.

The transfer has no effect on the company’s combined bank assets. If a transfer-clearing account is used, both sides should explain its balance. A period-end timing difference can leave a transfer in transit, but the amount needs evidence and subsequent settlement.

Recording account B’s receipt as revenue would overstate income. Recording account A’s payment as an expense would overstate costs. The combined cash total might still look right despite both errors.

Check the treatment of each other movement

The customer receipt should clear the relevant receivable. The supplier payment should reduce the appropriate payable. The €4,000 payout must connect to its settlement calculation; it is not automatically €4,000 of new sales. Salary payments must reconcile to the payroll liabilities supplied by the payroll process.

The €100 card purchase presents a different issue. Its presence on the bank statement and in the ledger establishes the bank movement. Its business purpose and final accounting treatment still need the receipt or other sufficient evidence.

Any temporary classification must remain identifiable and be resolved through the firm’s process. A zero bank difference does not turn an unexplained debit into a justified expense or establish input-VAT entitlement.

Why matching totals can still conceal an error

Imagine a €300 debit is omitted and a different €300 debit is imported twice. Total debits and the closing balance are unchanged. The transaction population is wrong.

Compare statement identifiers, dates, signed amounts and references. Check overlapping import periods and duplicates. Transaction counts are a useful warning, but a matching count alone is not proof either: one missing and one duplicate row can cancel that check as well.

For each statement, the evidence should show which movements are included, excluded as duplicate imports, or awaiting investigation. A genuine second payment must remain a real bank movement even if it was made by mistake.

Keep a short, reusable reconciliation record

Record the account and date, statement opening and closing balances, ledger balance, identified differences, correcting entries and any remaining business questions.

In this example, the final conclusions are specific:

• A: statement and ledger both €22,550 after recording the €50 fee.
• B: statement and ledger both €7,000.
• The €2,000 transfer is present on both accounts.
• The €100 card purchase is recorded; its supporting evidence remains a separate follow-up.

Hans combines bank intake, matching, settlement processing and bank workpapers. The bank agent investigates transaction context; the accountant agent can review balances and unresolved findings. The firm can then assess the completed reconciliation instead of rebuilding it from separate files.

Continue with payment-provider reconciliation or payroll payments and DATEV.