Bank reconciliation explains why your books and the bank statement show different balances on the same date. For businesses that use cheques, most of that difference is timing. Some cheques you issued have not yet been presented, and some cheques you deposited have not yet been credited. Once you list those items and adjust for anything the bank recorded that your books have not, the two figures should agree exactly.
This guide covers the cheque side of reconciliation: the two kinds of timing difference, a worked example, a month-end routine, and what to do with cheques that never clear.
The two timing differences
Unpresented cheques (issued, not yet cleared)
You wrote the cheque and recorded the payment in your cash book, so your book balance has gone down. The payee has not banked it yet, or it is still in clearing, so the bank balance has not gone down. Until it clears, the bank statement shows more money than your books.
These are sometimes called outstanding cheques or issued-but-uncleared cheques. Post-dated cheques you have handed over belong here as well, if you record them in the books before their date. Many businesses record them on the cheque date instead. Pick one method and use it consistently.
Uncleared deposits (deposited, not yet credited)
This is the opposite case. You deposited a customer's cheque and recorded the receipt, but the bank has not credited it by the statement date. Your books show more than the bank. Deposits made on the last working day of the month are the usual example.
Items only the bank knows about
The statement will also contain entries your books do not have yet. Typical ones are bank charges, cheque return charges, interest, direct debits, and customer cheques that bounced after you recorded them as received. These are not timing differences. You correct them by entering them in your books.
A worked example
Here is a month-end reconciliation as at 31 October:
| Item | Amount (₹) |
|---|---|
| Balance as per bank statement | 2,85,000 |
| Add: customer cheque deposited 31 Oct, not yet credited | 40,000 |
| Less: cheque 001245 to supplier A, issued 24 Oct, unpresented | (25,000) |
| Less: cheque 001248 to supplier B, issued 28 Oct, unpresented | (62,000) |
| Less: cheque 001251, salary advance, issued 30 Oct, unpresented | (18,000) |
| Adjusted bank balance | 2,20,000 |
| Item | Amount (₹) |
|---|---|
| Balance as per cash book | 2,36,180 |
| Less: bank charges on statement, not yet booked | (1,180) |
| Less: customer cheque returned unpaid on 29 Oct, not yet reversed | (15,000) |
| Adjusted cash book balance | 2,20,000 |
Both sides now show ₹2,20,000, so the reconciliation is complete. The three unpresented cheques and the uncleared deposit carry forward to November. Expect them to appear on next month's statement. If one of them does not, find out why.
The returned customer cheque needs follow-up, not just a book entry. See why cheques bounce and the return charges in cheque return charges.
Month-end steps
- Get the statement for the full period. Use the closing date that matches your books.
- List every cheque you issued that is not yet marked cleared. Include last month's unpresented cheques as well as this month's. This step is where a cheque register saves the most time.
- Tick off cleared cheques. Match each cheque debit on the statement by cheque number and amount. Mark it Cleared in your register with the statement date.
- Tick off deposits. Match the credits on the statement to the deposits in your books. Anything left over is an uncleared deposit, or a deposit that bounced.
- Book the bank-only items. Enter charges, interest, direct debits and returned deposits in the cash book.
- Prepare the reconciliation statement in the format above and check that both adjusted figures agree.
- Investigate differences. A cheque that cleared for a different amount than you recorded, a cheque number you do not recognise, or a figure out by a round amount all need checking before you sign off.
- Review old unpresented cheques. See the next section.
Problems are easier to fix the sooner you catch them. A difference that goes unresolved for three months turns into a long search later.
Stale cheques and write-back
An unpresented cheque cannot stay on the list forever. Once it passes its validity period, it can no longer be paid. That period is three months from the cheque date in India and six months in the UAE. See cheque validity and stale cheques.
When an issued cheque goes stale:
- Contact the payee. Usually the cheque was lost, never received or forgotten. The debt is normally still owed.
- Mark the cheque cancelled in your register. Optionally, ask the bank to stop payment as a precaution.
- Write it back in the books. Reverse the original entry: debit the bank, credit the supplier or employee account. This restores the bank balance and shows the amount as owed again. Do not treat it as income just because the cheque expired.
- Issue a fresh cheque or transfer when the payee confirms the details.
If the payee cannot be traced, ask your accountant how to treat the long-outstanding liability. That is a policy decision, not a bookkeeping shortcut.
Stale-cheque write-back is general accounting practice. Your accountant may have a specific policy or timing for it, and unclaimed amounts can have their own rules.
How exporting a cheque report helps
Reconciliation is a matching job, and matching is easiest in a spreadsheet. If you print cheques with ChequeMaster, every cheque is already recorded against its number with payee, amount, date and status. At month end:
- Filter the cheque report by date range and by status Issued to get your unpresented list in one step.
- Export it to Excel and paste the statement's cheque debits next to it. Match on cheque number, and differences in amount stand out quickly.
- Go back to ChequeMaster and mark matched cheques Cleared, and bounced ones Returned, so next month's Issued list starts clean.
- Use advanced search to look up any cheque the statement shows that you cannot place.
To be clear about what this does: ChequeMaster does not connect to your bank, does not read statements and does not reconcile automatically. It gives you an accurate, filterable list of what you issued, and you do the matching. Reports are part of the paid licence. See pricing.
