GUIDE · BANK RECONCILIATION

Bank Reconciliation Statement: Format, Steps and How to Do It with Claude

Last updated: 4 November 2026 | By CA Varsha Varyani | 15 min read

Want to run this on your own files? Learn it in Claude for Accountants.

This guide gives you the format, the rule for every adjustment (add or subtract, and why), a complete worked example, the journal entries it produces, and the exact Claude prompts to do the matching on a bank statement file in minutes. You finish with a reconciled statement you can sign.

Free download: Bank reconciliation prompts for Claude (PDF), the copy-ready prompts from this guide.

What a bank reconciliation is

Every deposit and withdrawal is recorded in two places: in your cash book (the bank column, or the bank ledger in accounting software) and in the bank's own records, which you see as the pass book or the bank statement. The two should show equal and opposite balances. When you deposit Rs 1,00,000, your books show a debit balance of that amount and the bank shows a credit balance in your favour, because the bank owes you the money.

ICAI's Foundation study material (Chapter 3) defines the process this way: "the statement which reconciles the bank balance as per cash book with the balance as per the pass book by showing all the causes of difference is known as bank reconciliation statement."

Why it matters. ICAI lists the benefits as: it brings out errors in either book; it shows up any undue delay in clearing of cheques; a regular reconciliation discourages embezzlement (ICAI notes cases where cashiers entered receipts in the cash book but never deposited them, and got away with it only because nobody reconciled); and it shows the true bank position after uncleared items. It is a basic internal control, which is why auditors ask for it.

How often. ICAI says reconciliation is typically done monthly or quarterly, depending on the size of the organisation and the number of transactions. Many finance teams do it weekly or daily for accounts with heavy volume.

“Most small and mid-sized trading and services clients reconcile monthly at best, and many only at year-end. The weakest practice is matching the closing balance and leaving the reconciling items to pile up.” — CA Varsha Varyani

Why the two balances differ: the three causes

ICAI groups every difference into three causes.

1. Timing. The same transaction is recorded on different dates in the two books. Examples: you issue a cheque and record it at once, but the bank pays it only when it is presented; you deposit a cheque and record it at once, but the bank credits it only when it clears.

2. Transactions the bank records first. The bank does things on its own and you learn of them from the statement: interest credited to your account, bank charges, standing instructions such as loan EMIs and insurance premiums, collections of dividends or bills, customer payments straight into your account, and cheques that come back dishonoured.

3. Errors. A wrong amount, a missed entry, an entry on the wrong side, or wrong totalling, in your books or (rarely) the bank's. ICAI says errors must be corrected in the books before you prepare the statement.

The items, and whether to add or subtract

ICAI gives two lists depending on which balance is bigger. In one table, starting from the cash book balance and going to the pass book balance:

Going the other way (from the pass book to the cash book), every sign reverses. ICAI's worked illustration does it both ways to show they agree.

Source of the lists: ICAI, Foundation Paper 1, Chapter 3, "Causes of difference".

The BRS format

There is no format laid down by law. ICAI teaches the form below, and it is the one auditors expect. Choose one starting point and stay with it.

Bank Reconciliation Statement of [Company name]
as on [date]

Balance as per cash book (Dr)                                          X

Add:   Cheques issued but not yet presented for payment
       Interest / dividend credited by bank, not yet in cash book
       Direct deposits by customers, not yet in cash book              +

Less:  Cheques deposited but not yet cleared
       Bank charges / interest debited by bank, not yet in cash book
       Direct payments by bank (EMI, premium), not yet in cash book
       Cheques dishonoured, not yet in cash book                       -

Balance as per pass book / bank statement (Cr)                         X

If the cash book shows an overdraft (a credit balance), or if you start from the pass book, the signs flip. ICAI's table of adjustments gives the sign for each of the four starting points. A positive final answer means a favourable balance if you started from a cash book debit or pass book credit, and an overdraft otherwise.

Best practice we recommend: first pass every item that is not a timing item (interest, charges, EMIs, direct deposits, dishonours) through the books. Then your corrected cash book balance differs from the bank statement only by cheques in transit, and the statement is short and clean.

Worked example: Sample Traders Pvt Ltd, 31 December 2026

Sample data only. Opening balance on 1 Dec 2026 is Rs 2,00,000 in both books.

Cash book (bank column), December

Closing balance per cash book: 2,00,000 + 4,00,000 - 1,75,000 = Rs 4,25,000 (Dr).

Bank statement, December

Closing balance per bank statement: 2,00,000 + 3,33,200 - 1,23,590 = Rs 4,09,610 (Cr).

Step 1. Tick matching items

Match by amount, date and cheque number. Matched in both: E's NEFT, cheques 001201 and 001204, F's, G's and D's deposits (D's later returned), and the opening balance.

Step 2. List what is left

Only in the cash book: cheques 001202 (Rs 60,000) and 001203 (Rs 25,000) not yet presented; C's cheque of Rs 1,10,000 deposited on 30 Dec and not yet cleared. Only in the bank statement: the EMI of Rs 18,000; M's NEFT of Rs 40,000; D's returned cheque of Rs 15,000; interest Rs 3,200; charges Rs 590.

Step 3. Prepare the statement

Balance as per cash book (Dr)                                   4,25,000
Add:  Cheque 001202 issued, not presented                          60,000
      Cheque 001203 issued, not presented                          25,000
      Interest credited by bank                                     3,200
      Direct deposit, Customer M                                   40,000
                                                                  --------
                                                                   5,53,200
Less: Cheque from Customer C deposited, not cleared               1,10,000
      Bank charges                                                     590
      Loan EMI paid by bank                                         18,000
      Cheque of Customer D returned unpaid                          15,000
                                                                  --------
Balance as per bank statement (Cr)                                4,09,610

It agrees with the statement balance of Rs 4,09,610, so the reconciliation is complete.

Step 4. Pass the entries for the items the bank recorded first

Interest, charges, the EMI, M's deposit and D's dishonour are not timing items. Your books are incomplete without them.

Bank A/c                         Dr   3,200
    To Interest Income A/c                3,200
Bank Charges A/c                 Dr     590
    To Bank A/c                             590
Loan A/c / Interest (as per schedule) Dr  18,000
    To Bank A/c                          18,000
Bank A/c                         Dr  40,000
    To Customer M (Debtors) A/c          40,000
Customer D (Debtors) A/c         Dr  15,000
    To Bank A/c                          15,000

The EMI must be split between principal and interest as per the loan schedule. If the bank statement shows GST on the charges, book it as a separate line. How that GST is treated in the client's returns is a tax question for the client's CA; this guide does not cover it.

After these entries the cash book balance is 4,25,000 + 3,200 - 590 - 18,000 + 40,000 - 15,000 = Rs 4,34,610, and the only differences left are the three cheques in transit: +60,000 + 25,000 - 1,10,000 = -25,000. So 4,34,610 - 25,000 = Rs 4,09,610, the bank balance. The statement is now short: three lines.

Cheques that stay unpresented. RBI directed banks that from 1 April 2012 they should not pay a cheque, draft, pay order or banker's cheque presented more than three months after the date of the instrument (RBI circular RBI/2011-12/251, 4 November 2011). So a cheque that has been "issued but not presented" for more than three months is stale: do not carry it forever. Contact the payee, reissue, and reverse the old entry: the amount goes back into the bank column of your cash book and stays owed to the payee until the new cheque is issued, because the stale cheque no longer discharges the debt.

“In a retail business, small unbooked bank charges and unidentified receipts from customers paying by UPI with no reference. Individually tiny, but they’d been sitting for months. Sorting the list by age instead of amount is what surfaced them.” — CA Varsha Varyani

Do it with Claude

Before you paste anything: take out names, PAN, GSTIN and account numbers, or use sample values. Claude can make mistakes, so ask it to show every match and then check the totals yourself. The statement must foot to the bank balance; if it does not, there is an error somewhere, and you want Claude to point to it, not hide it.

Upload both files (cash book export and bank statement, as Excel or CSV) or paste the rows.

Prompt 1. Match the two lists

You are helping a chartered accountant in India. SAMPLE data, December 2026.

I am giving you two lists: (A) the bank ledger from my books, and (B) the bank
statement. Opening balance in both on 1 Dec 2026 was 200000.

Task:
1. Match items in A with items in B using amount first, then cheque number or
   customer name, then date. A matched pair can have different dates (cheque
   clearing). Do not force a match: if you are not sure, put it in "Doubtful".
2. Output four lists: Matched (with both dates), Only in A, Only in B, Doubtful.
3. For every item in "Only in A" and "Only in B", say which category it is:
   cheque issued not presented / cheque deposited not cleared / interest /
   bank charge / direct debit / direct credit / dishonoured cheque / other.
4. Check that the total of A's movement and B's movement are explained by your lists.
   Show the arithmetic.

[Paste list A and list B here]

Prompt 2. Build the statement and the entries

Using the lists above (SAMPLE), prepare the Bank Reconciliation Statement as on
31 Dec 2026, starting from the balance as per cash book 425000 and ending at
the balance as per bank statement 409610.
Use this format: Add / Less groups, with each item on its own line and a
subtotal. Then:
(a) check the final figure equals the bank statement balance;
(b) write the journal entries for every item that is not a timing item
    (interest, charges, direct debits, direct credits, dishonoured cheques),
    with narration;
(c) list the cheques that are still in transit, with their dates, so I can
    chase them.
If the statement does not agree, do not adjust anything to force it: tell me
the difference and the most likely cause.

Prompt 3. Find what does not match

The reconciliation is out by Rs [amount] (SAMPLE). Look for: a transposed
number (for example 4,520 vs 4,250), an amount recorded twice, an amount missed
from one list, a deposit recorded on the wrong side, and a difference equal to
exactly half of an item. List the candidates in order of likelihood.

“It’s very good where there’s a clean reference. UPI entries, and NEFT or RTGS with the invoice number or UTR in the narration, match almost instantly. It struggles when one payment covers many invoices, or when the customer deducts TDS or bank charges and pays a net amount. Then it either forces a wrong match or gives up. Those I still sort out by hand, using the remittance advice.” — CA Varsha Varyani

Common mistakes

• Reconciling against the wrong date. The statement date must be the same as the book balance date. A cheque that cleared on 2 January is not in a 31 December statement.
• Carrying the same items forever. An item older than a month or two needs a reason. Sort the open items by age, not by amount: small items that have sat for months (unbooked bank charges, receipts with no reference) are easy to miss when you look at the big amounts first. Cheques older than three months from their date will not be paid by the bank (RBI, above).
• Plugging the difference. A "suspense" or "difference" line that is not explained is the thing the reconciliation exists to remove.
• Same person writes cheques and reconciles. ICAI's examples of fraud are the reason the reconciliation should be reviewed by someone else.
• Forgetting the entries. The statement is not a book of account. Interest, charges, EMIs and dishonours must still be passed in your books.
• Using the wrong sign for an overdraft. When the cash book has an overdraft (credit balance) or you start from the pass book, every sign reverses.

Where to go next

• Related workflow: Depreciation as per Companies Act and Income Tax Act
• Run this on your own files: the Claude for Accountants course teaches bank reconciliation as one of its five modules, recorded on sample data.

Frequently asked questions

Sources (primary; read on 3 and 4 November 2026)

• ICAI, Foundation Course Paper 1: Accounting, Chapter 3, Bank Reconciliation Statement (definition, importance, causes of difference, procedure and adjustment table): https://resource.cdn.icai.org/74612bos60479-fnd-cp3.pdf
• Reserve Bank of India, circular RBI/2011-12/251 (DBOD.AML BC.No.47/14.01.001/2011-12), "Payment of Cheques/Drafts/Pay Orders/Banker's Cheques", 4 November 2011 (validity of three months from 1 April 2012; re-read 4 November 2026, wording: "banks should not make payment of cheques/drafts/pay orders/banker's cheques bearing that date or any subsequent date, if they are presented beyond the period of three months from the date of such instrument"): https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6805&Mode=0