QCE Accounting - Unit 3 - Cash management
Bank Reconciliation Statements | QCE Accounting
Learn bank reconciliation statements, cash at bank corrections, unpresented cheques, outstanding deposits, bank charges and internal control for QCE Accounting.
Updated 2026-05-18 - 5 min read
QCAA official coverage - Accounting 2025 v1.2
Exact syllabus points covered
- Explain administrative and internal controls relating to cash and banking.
- Prepare bank reconciliation statements from cash at bank records and bank statements.
- Identify and record cash at bank adjustments such as bank charges, interest, dishonoured cheques and direct deposits.
- Evaluate the effectiveness of internal controls for cash management.
A bank reconciliation statement explains the difference between the business Cash at Bank ledger balance and the balance shown on the bank statement. The two balances often differ even when no error exists because the business and the bank record some transactions at different times.
The bank statement is written from the bank's perspective. Money deposited by the business is a liability of the bank to the customer, so it appears as a credit on the bank statement. Money paid out of the account appears as a debit. The Cash at Bank ledger is written from the business perspective: receipts debit Cash at Bank, and payments credit Cash at Bank.
Original Sylligence diagram for accounting bank reconciliation flow.
Original Sylligence diagram for accounting bank reconciliation layout.
Why reconciliations matter
Bank reconciliations support accuracy and control. They help identify omitted transactions, duplicate entries, transposition errors, unauthorised withdrawals, dishonoured cheques, bank charges and late deposits. A regular reconciliation is also a deterrent because staff know that the bank account is independently checked.
In a well-controlled business, the person who prepares the bank reconciliation should not be the same person who receives cash, authorises payments and records every cash transaction. Separation of duties reduces the chance that one person can both commit and hide an error or fraud.
Common reconciling items
| Item | Appears where first? | Treatment | |---|---|---| | Outstanding deposit | Cash receipts journal or ledger but not bank statement | Add to bank statement balance in the reconciliation | | Unpresented cheque or payment | Cash payments journal or ledger but not bank statement | Deduct from bank statement balance in the reconciliation | | Bank fee | Bank statement but not business records | Record in the cash payments journal or general journal, then update Cash at Bank | | Interest received | Bank statement but not business records | Record as income and update Cash at Bank | | Direct deposit by customer | Bank statement but not business records | Record receipt and update the customer or revenue account | | Dishonoured cheque | Initially recorded as receipt, then reversed by the bank | Record reversal, usually restoring the account receivable | | Error by business | Business records incorrect | Correct the ledger | | Error by bank | Bank statement incorrect | Show in reconciliation until bank corrects it |
Process for preparing a reconciliation
- Compare deposits in the Cash Receipts Journal or Cash at Bank ledger with deposits on the bank statement.
- Compare payments in the Cash Payments Journal or Cash at Bank ledger with withdrawals on the bank statement.
- Tick matched items and list unticked items.
- For items appearing only on the bank statement, update the business records because the business has not yet recorded them.
- For items already recorded by the business but missing from the bank statement, include them in the bank reconciliation statement as timing differences.
- Check that the adjusted bank statement balance equals the corrected Cash at Bank balance.
The final reconciliation usually starts with the bank statement balance, then adds outstanding deposits and deducts unpresented cheques. Some teachers use the opposite layout, starting with the Cash at Bank balance. Both are logically valid if signs are consistent, but the QCE task instructions should be followed.
Internal control links
Bank reconciliations are part of a larger control system. Strong cash controls include prenumbered receipts, daily banking, EFT authorisation limits, password protection, two-person approval for large payments, independent review of reconciliations, secure storage of cash, restricted access to online banking and regular backups of accounting records.
An internal control should be judged against risk. A small business does not need a complicated system that prevents work from happening, but it does need enough separation, authorisation and documentation to protect cash. The owner should also consider the cost-benefit trade-off: a control is worthwhile when the protection it gives justifies its cost and effort.