IGCSE Accounting — Bank Reconciliation: Notes, Practice Questions & Worked Solutions

IGCSE Accounting 0452 · Section 3: Verification of Accounting Records

Bank Reconciliation

The cash book balance and the bank statement balance rarely match on any given day — not because of an error, but because of timing. Bank reconciliation identifies and explains every difference.

1. Two Types of Difference

Type	Examples	What to do
Items the business doesn’t know about yet	Bank charges, interest, direct debits, standing orders, credit transfers received, dishonoured cheques	Update the cash book to include them
Timing differences	Unpresented cheques (paid out, not yet cleared), uncredited/outstanding deposits (paid in, not yet showing)	Adjust the bank statement balance in a reconciliation statement

Worked example — updating the cash book The cash book shows a balance of $500. The bank statement reveals bank charges of $20 and a direct debit of $30 (neither yet in the cash book), and a credit transfer received of $100 (also not yet recorded). Find the updated cash book balance.
500 − 20 (charges) − 30 (direct debit) + 100 (credit transfer) = $550

Worked example — the bank reconciliation statement After updating, the cash book balance is $550. There are unpresented cheques of $80 and uncredited deposits of $150. Find the balance shown on the bank statement.
Balance per updated cash book: $550
Add unpresented cheques (already deducted in cash book, but not yet by the bank): +$80
Less uncredited deposits (already added in cash book, but not yet by the bank): −$150
Balance per bank statement = 550 + 80 − 150 = $480

Common mistakes to watch for

Adjusting the CASH BOOK for timing differences (unpresented cheques/uncredited deposits) — these only appear in the reconciliation STATEMENT, since the cash book figure is already correct from the business’s point of view.
Adjusting for a genuine bank error (rare) by changing the cash book — bank errors are corrected by the bank, not by adjusting the business’s own records.
Getting the +/− signs backwards in the reconciliation statement — always think about which figure (cash book or bank statement) is “ahead” and which is “behind.”

Key Vocabulary Recap

Unpresented cheque — a cheque paid out by the business but not yet cleared by the bank

Uncredited deposit — money paid into the bank but not yet reflected on the statement

Syllabus Reference

This note covers IGCSE Accounting 0452 Section 3, Bank Reconciliation: updating the cash book, bank charges and interest, direct debits and standing orders, credit transfers, unpresented cheques, uncredited deposits, and bank errors.

Practice questions

IGCSE Accounting 0452 · Section 3: Bank Reconciliation — Practice Question Bank (no answers)

Bank Reconciliation — Practice

Covers: updating the cash book and preparing a bank reconciliation statement. 10 questions.

Explain why the cash book balance and the bank statement balance often differ on any given day.

Explain what is meant by an unpresented cheque.

Explain what is meant by an uncredited deposit.

State whether each of the following requires the cash book to be updated, or an adjustment in the reconciliation statement: (a) bank charges, (b) an unpresented cheque.

The cash book shows a balance of $700. Bank charges of $15 and a standing order of $40 appear on the bank statement but not the cash book. Calculate the updated cash book balance.

The cash book shows a balance of $900. A credit transfer of $250 received from a customer appears on the bank statement but not the cash book. Calculate the updated cash book balance.

After updating, the cash book balance is $550. There are unpresented cheques of $80 and uncredited deposits of $150. Calculate the balance shown on the bank statement.

Explain how a dishonoured cheque should be treated in the cash book.

Explain why a genuine error made by the bank should not be corrected by adjusting the business’s cash book.

Q10

State one purpose of preparing a bank reconciliation statement.

Worked solutions

Show worked solutions

IGCSE Accounting 0452 · Section 3: Bank Reconciliation — Solutions

Bank Reconciliation — Practice: Solutions

Why do the two balances often differ?

✓Because of timing differences — some transactions recorded in the cash book (e.g. cheques just paid out or deposits just paid in) take a few days to be processed and appear on the bank statement, and some bank transactions (e.g. bank charges) may not yet be known to the business and recorded in the cash book.

Explain unpresented cheque.

✓A cheque that has been written and recorded as paid out in the business’s cash book, but has not yet been paid in by the recipient and cleared through the banking system, so it doesn’t yet appear on the bank statement.

Explain uncredited deposit.

✓Money that has been paid into the bank and recorded as received in the business’s cash book, but has not yet been processed and shown on the bank statement.

Cash book update or reconciliation statement adjustment?

✓(a) Bank charges — update the cash book (b) Unpresented cheque — adjustment in the reconciliation statement

Cash book $700; charges $15, standing order $40.

Both reduce the cash book balance

700−15−40

✓$645

Cash book $900; credit transfer $250 received.

A receipt increases the cash book balance

900+250

✓$1,150

Updated cash book $550; unpresented $80; uncredited $150.

Balance per bank statement = cash book + unpresented cheques − uncredited deposits

550+80−150

✓$480

Treatment of a dishonoured cheque.

✓A dishonoured cheque (one that “bounces” and isn’t paid by the customer’s bank) is removed from the cash book by reversing the original receipt — effectively re-instating the customer as owing the money, since the payment never actually went through.

Why not correct a bank error in the cash book?

✓Because the business’s own cash book records are correct — the mistake belongs to the bank, so it should be reported to the bank and corrected by them on the bank statement, not by altering the business’s accurate records.

Q10

One purpose of a bank reconciliation statement.

✓To confirm that the difference between the cash book balance and the bank statement balance is fully explained by known timing differences (and not by an unnoticed error or fraud).

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