Why is "Entering unpresented cheques / lodgements in the cash book" a common mistake in Bank Reconciliation Statements?

Why it happens: Treating them like bank-known items. How to avoid it: Timing differences are already correctly recorded in the cash book; they go ONLY in the reconciliation statement. Source: 9706 Examiner Reports

Why is "Getting the add/deduct direction wrong" a common mistake in Bank Reconciliation Statements?

Why it happens: Not thinking which record is ahead. How to avoid it: From a positive cash-book balance: ADD unpresented cheques, DEDUCT outstanding lodgements to reach the statement. Source: 9706 Examiner Reports

Why is "Not reversing the signs for an overdraft" a common mistake in Bank Reconciliation Statements?

Why it happens: Applying the positive-balance rules. How to avoid it: For an overdraft (credit cash-book balance), DEDUCT unpresented cheques and ADD outstanding lodgements. Source: 9706 Examiner Reports

Why is "Using the bank statement balance in the SOFP" a common mistake in Bank Reconciliation Statements?

Why it happens: Assuming the bank's figure is correct. How to avoid it: The UPDATED cash book balance appears in the statement of financial position, not the bank statement balance. Source: 9706 Examiner Reports

Why is "Correcting cash-book errors in the reconciliation statement" a common mistake in Bank Reconciliation Statements?

Why it happens: Confusing errors with timing differences. How to avoid it: Cash-book errors are corrected by UPDATING the cash book (Step 1), not in the reconciliation statement. Source: 9706 Examiner Reports

Why is "Forgetting to record bank charges/interest in the cash book" a common mistake in Bank Reconciliation Statements?

Why it happens: Treating them as the bank's concern. How to avoid it: Bank charges, interest, direct debits and dishonoured cheques are genuine transactions — update the cash book for them. Source: 9706 Examiner Reports

Cambridge International A Levels Accounting (9706)

Bank Reconciliation Statements

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Detailed Study Notes

Detailed notes on Reconciliation and Verification for Cambridge International A Levels Accounting, covering key concepts, explanations, examples, and exam-focused revision points.

Bank Reconciliation Statements — Cambridge AS & A Level Accounting 9706 Study Notes (2026-2028)

How a business proves its cash book agrees with the bank. Learn the two-step process — first update the cash book for items the bank knew about but the business did not, then reconcile the updated balance to the statement using unpresented cheques and outstanding lodgements — and the benefits and limitations.

At a glance

Two steps: (1) update the cash book for items on the bank statement not yet recorded; (2) prepare the reconciliation statement for timing differences.
Update the cash book for: bank charges, interest, direct debits/standing orders, credit transfers received, dishonoured cheques, and any cash-book errors.
Reconciliation statement timing differences: unpresented cheques (paid but not yet on the statement) and outstanding lodgements (banked but not yet on the statement).
A debit balance in the cash book = money in the bank; the bank statement shows it as a credit (the bank owes the business).
Start the reconciliation from the updated cash book balance and arrive at the bank statement balance.
Benefits: detect errors, fraud and missing transactions; limitation: does not catch every error.

What you’ll learn

Mapped to the Cambridge International A Level 9706 syllabus (2026-2028).

1.4.3 — Update cash books for items appearing on the bank statement.
1.4.3 — Prepare bank reconciliation statements.
1.4.3 — Understand the benefits and limitations of preparing a bank reconciliation statement.

Why the cash book and bank statement differ

Some items are known to the bank first; some are known to the business first.

The cash book (the business's record) and the bank statement (the bank's record) of the same account often differ for two reasons:

1. Items the bank knew about first (so they are on the statement but not yet in the cash book):

bank charges and interest;
direct debits and standing orders;
credit transfers received directly into the account;
dishonoured cheques the bank has returned.

2. Timing differences (recorded by the business but not yet on the statement):

unpresented cheques — cheques the business has written and recorded, but the recipient has not yet banked;
outstanding lodgements (uncredited deposits) — amounts the business has banked and recorded, but the bank has not yet processed.

There may also be errors in either record.

Bank-known items: charges, interest, direct debits/standing orders, credit transfers, dishonoured cheques.
Timing differences: unpresented cheques and outstanding lodgements.
Plus possible errors in the cash book or the statement.
The two records rarely agree without reconciliation.

See the full worked example for bank reconciliation statements →

Step 1 — update the cash book

Record the items the bank knew about but the business had not.

First, bring the cash book up to date for the items the bank had already recorded (Step 1). These are genuine transactions the business simply had not yet entered:

Add to the cash book (debit)	Deduct from the cash book (credit)
Credit transfers / amounts received	Bank charges and interest paid
	Direct debits and standing orders
	Dishonoured cheques

Also correct any cash-book errors here.

This gives the updated (corrected) cash book balance, which is the figure shown in the statement of financial position — not the original cash book balance or the bank statement balance.

Important: unpresented cheques and outstanding lodgements are timing differences — they are NOT entered in the cash book (they are already correctly recorded); they go in the reconciliation statement in Step 2.

Add credit transfers/receipts; deduct charges, interest, direct debits, standing orders, dishonoured cheques.
Correct any cash-book errors here.
The updated cash book balance goes in the statement of financial position.
Do NOT enter unpresented cheques / outstanding lodgements in the cash book.

See the full worked example for bank reconciliation statements →

Step 2 — prepare the reconciliation statement

Adjust the updated cash book balance for timing differences to reach the bank statement balance.

Second, prepare the bank reconciliation statement to explain the remaining (timing) differences. Starting from the updated cash book balance:

Bank reconciliation statement	$
Balance as per updated cash book	X
Add: unpresented cheques	X
Less: outstanding lodgements	(X)
Balance as per bank statement	X

The logic (starting from a positive cash-book balance):

Unpresented cheques have reduced the cash book but not yet the bank statement, so the statement is higher → add them.
Outstanding lodgements have increased the cash book but not yet the bank statement, so the statement is lower → deduct them.

The statement should arrive at the bank statement balance, proving the two records reconcile.

Start from the updated cash book balance.
Add unpresented cheques; deduct outstanding lodgements.
Arrive at the bank statement balance.
This proves the two records reconcile after timing differences.

See the full worked example for bank reconciliation statements →

Benefits and limitations

A strong independent check, but it does not catch every error or fraud.

Benefits:

Reconciling to the bank statement (an independent external record) checks the cash book against evidence the business did not produce.
It detects errors in the cash book (and occasionally the bank's errors).
It identifies bank items not yet recorded (charges, dishonoured cheques) so the cash book and profit are correct.
It helps detect and deter fraud — e.g. takings recorded but not banked.

Limitations:

It does not catch every error — e.g. a transaction omitted from both records, or an error that affects both equally.
It only checks the bank account, not the rest of the books.
It relies on the statement being accurate and the work being done regularly.

So a bank reconciliation gives reasonable, not absolute, assurance over the cash book.

Benefits: independent check, detects errors and unrecorded bank items, deters fraud.
Updating the cash book keeps profit and the bank balance correct.
Limitations: misses errors omitted from both records; only checks the bank account.
Gives reasonable, not absolute, assurance.

See the full worked example for bank reconciliation statements →

Quick recap

Step 1: update the cash book for bank-known items (charges, interest, direct debits, credit transfers, dishonoured cheques).
Step 2: reconcile the updated cash book balance to the bank statement using timing differences.
Unpresented cheques: add; outstanding lodgements: deduct (for a positive cash-book balance).
The updated cash book balance is the figure in the statement of financial position.
An overdraft reverses the signs in the reconciliation.
Benefits: independent check, detects errors/fraud; limitation: misses some errors.

Memorise this

Verbatim phrases and definitions Cambridge mark schemes credit.

Step 1: update the cash book for charges, interest, direct debits, credit transfers, dishonoured cheques.
Step 2: updated cash book balance + unpresented cheques − outstanding lodgements = bank statement balance.
Unpresented cheques / outstanding lodgements are NOT entered in the cash book.
The updated cash book balance appears in the statement of financial position.

How it’s examined

Frequently tested on Paper 2: Update the cash book, Prepare the bank reconciliation statement, and State the benefits/limitations (4-8 marks, point-based). Examiner reports note candidates entering unpresented cheques in the cash book, and getting the add/deduct directions wrong (especially for overdrafts).

Sources: Cambridge International AS & A Level Accounting 9706 syllabus (2026-2028); 9706 Paper 2 past papers & mark schemes, 2022-2024; 9706 Examiner Reports, 2022-2024. Last reviewed 2026-06-17.

Take this whole topic with you

Step-by-step worked examples — Bank Reconciliation Statements

Step-by-step solutions to past-paper-style questions on bank reconciliation statements, written exactly the way a tutor would explain them at the board.

Question type:

1Cash book update or reconciliation? (5 marks)
Getting startedIdentify & classify• 9706 Paper 2 style• bank reconciliation, AO1
Question
State whether each is dealt with by updating the cash book (C) or in the reconciliation statement (R): (i) bank charges; (ii) an unpresented cheque; (iii) a credit transfer received; (iv) an outstanding lodgement; (v) a dishonoured cheque. (5 marks)
Step-by-step solution
1. Step 1
  (i) Bank charges → C (update the cash book).
2. Step 2
  (ii) Unpresented cheque → R (timing difference).
3. Step 3
  (iii) Credit transfer received → C.
4. Step 4
  (iv) Outstanding lodgement → R.
5. Step 5
  (v) Dishonoured cheque → C.
Answer
(i) C; (ii) R; (iii) C; (iv) R; (v) C.
Examiner tip
Bank-known items update the cash book; timing differences go in the reconciliation.
2Update the cash book (5 marks)
Building confidenceMulti-step problem• cash book, AO2
Question
The cash book shows a debit balance of $4,200. The bank statement reveals: bank charges$ 80; a direct debit $300; a credit transfer received$ 1,500; a dishonoured cheque $250. Calculate the updated cash book balance. (5 marks)
Step-by-step solution
1. Step 1
  Start: 4,200 (debit).
2. Step 2
  Add credit transfer received: +1,500 → 5,700.
3. Step 3
  Deduct charges 80, direct debit 300, dishonoured cheque 250 → −630.
4. Step 4
  Updated cash book balance = 5,700 − 630 = $5,070 (debit).
Answer
Updated cash book balance = $5,070 (debit).
Examiner tip
Add receipts the business hadn't recorded; deduct charges, direct debits and dishonoured cheques.
3Prepare the reconciliation statement (5 marks)
Building confidenceMulti-step problem• reconciliation, AO2
Question
The updated cash book balance is $5,070 (debit). Unpresented cheques total$ 900; outstanding lodgements total $1,400. Prepare the bank reconciliation statement to find the bank statement balance. (5 marks)
Step-by-step solution
1. Step 1
  Start: balance per updated cash book 5,070.
2. Step 2
  Add unpresented cheques 900 → 5,970.
3. Step 3
  Deduct outstanding lodgements 1,400 → 4,570.
4. Step 4
  Balance per bank statement = $4,570.
Answer
Bank statement balance = $4,570.
Examiner tip
From a positive cash book balance: add unpresented cheques, deduct outstanding lodgements.
4Full reconciliation (6 marks)
Building confidenceMulti-step problem• bank reconciliation, AO2
Question
Cash book debit balance $3,000. Bank statement shows: charges$ 60; standing order $400; interest received$ 40. Unpresented cheques $700; outstanding lodgements$ 1,100. Calculate (a) the updated cash book balance and (b) the bank statement balance. (6 marks)
Step-by-step solution
1. Step 1
  (a) Update: 3,000 + 40 (interest received) − 60 − 400 = $2,580 (debit).
2. Step 2
  (b) Reconcile: 2,580 + unpresented 700 − outstanding lodgements 1,100.
3. Step 3
  = $2,180 (bank statement balance).
Answer
(a) Updated cash book $2,580; (b) bank statement$ 2,180.
Examiner tip
Two clear steps: update the cash book, then reconcile to the statement.
5Overdraft reconciliation (6 marks)
StretchMulti-step problem• overdraft, AO2
Question
The updated cash book shows a credit (overdrawn) balance of $2,000. Unpresented cheques total$ 800; outstanding lodgements total $1,300. Prepare the reconciliation statement to find the bank statement balance. (6 marks)
Step-by-step solution
1. Step 1
  With an overdraft, the signs reverse.
2. Step 2
  Start: overdrawn cash book balance (2,000) overdrawn.
3. Step 3
  Deduct unpresented cheques 800 → overdraft 2,800? Re-check: unpresented cheques reduce the statement overdraft → so they make the statement less overdrawn → deduct from the overdraft.
4. Step 4
  Updated cash book overdraft 2,000; less unpresented cheques 800 → 1,200; add outstanding lodgements 1,300 → 2,500 overdrawn.
5. Step 5
  Bank statement balance = $2,500 overdrawn.
Answer
Bank statement balance = $2,500 overdrawn.
Examiner tip
For an overdraft, unpresented cheques are deducted and outstanding lodgements added.
6Reconciliation with a cash-book error (6 marks)
StretchMulti-step problem• error, AO2
Question
Cash book debit balance $5,500. The bank statement shows charges$ 90 (not in the cash book). A cheque received for $360 had been entered in the cash book as$ 630 in error. Unpresented cheques $600; outstanding lodgements$ 450. Calculate (a) the updated cash book balance and (b) the bank statement balance. (6 marks)
Step-by-step solution
1. Step 1
  Cash-book error: receipt overstated by 630 − 360 = 270 → reduce cash book by 270.
2. Step 2
  (a) Update: 5,500 − 90 (charges) − 270 (error) = $5,140 (debit).
3. Step 3
  (b) Reconcile: 5,140 + unpresented 600 − outstanding lodgements 450 = $5,290.
Answer
(a) Updated cash book $5,140; (b) bank statement$ 5,290.
Examiner tip
Correct cash-book errors in the update step, not in the reconciliation statement.
7Work back to the cash book balance (5 marks)
StretchMulti-step problem• bank reconciliation, AO2
Question
The bank statement shows a balance of $6,800. Unpresented cheques total$ 1,200; outstanding lodgements total $900. Calculate the updated cash book balance. (5 marks)
Step-by-step solution
1. Step 1
  Reverse the reconciliation: from the bank statement back to the cash book.
2. Step 2
  Statement 6,800 − unpresented cheques 1,200 + outstanding lodgements 900.
3. Step 3
  = $6,500 updated cash book balance.
Answer
Updated cash book balance = $6,500.
Examiner tip
Working from the statement to the cash book reverses the add/deduct signs.
8Which balance for the SOFP? (4 marks)
StretchWord problem• bank reconciliation, AO2
Question
A business has a cash book balance of $4,000, an updated cash book balance of$ 3,700 and a bank statement balance of $4,500. State which figure appears in the statement of financial position and why. (4 marks)
Step-by-step solution
1. Step 1
  The updated cash book balance $3,700 appears in the statement of financial position.
2. Step 2
  It reflects all transactions to date, including bank charges and other items now recorded.
3. Step 3
  The original cash book is incomplete; the bank statement includes the bank's timing position, not the business's records.
4. Step 4
  So only the updated cash book gives the true bank asset/liability of the business.
Answer
The updated cash book balance ($3,700) — it reflects all transactions; the original is incomplete and the statement reflects timing differences.
Examiner tip
The updated cash book balance is the SOFP figure, not the original or the statement balance.
9Benefits of bank reconciliation (4 marks)
StretchIdentify & classify• benefits, AO1
Question
State four benefits to a business of preparing a bank reconciliation statement regularly. (4 marks)
Step-by-step solution
1. Step 1
  Checks the cash book against an independent record (the bank statement).
2. Step 2
  Detects errors in the cash book (or the bank's records).
3. Step 3
  Identifies bank items not yet recorded (charges, dishonoured cheques) so the cash book is correct.
4. Step 4
  Helps detect and deter fraud (e.g. takings recorded but not banked).
Answer
Independent check; detects errors; identifies unrecorded bank items; detects/deters fraud.
Examiner tip
Distinct benefits each score; the independence of the bank statement is key.
10Detecting fraud via reconciliation (5 marks)
StretchWord problem• fraud, AO3
Question
Explain how a bank reconciliation, prepared by someone other than the cashier, could reveal that the cashier has been stealing banked cash. (5 marks)
Step-by-step solution
1. Step 1
  The cash book/takings record would show more received and 'banked' than actually reached the bank.
2. Step 2
  The bank statement (independent) would show the lower amount actually deposited.
3. Step 3
  Reconciling the two would reveal an unexplained shortfall that is not a genuine timing difference.
4. Step 4
  Because an independent person prepares the reconciliation (segregation of duties), the cashier cannot hide the difference.
5. Step 5
  Investigating the shortfall would expose the theft.
Answer
The cash book shows more 'banked' than the statement; an independent reconciliation reveals the unexplained shortfall, exposing the theft.
Examiner tip
Link the shortfall + independent preparer (segregation of duties) to detecting the fraud.

Model Answers — Bank Reconciliation Statements

High-scoring sample answers for bank reconciliation statements on the Cambridge IGCSE paper, with examiner-style notes mapping each response to the mark scheme and assessment objectives.

Question 1
9706 Paper 2 style4 marks
Q (4 marks). State whether each is recorded by updating the cash book or in the bank reconciliation statement: (a) bank interest charged; (b) an outstanding lodgement; (c) a standing order; (d) an unpresented cheque.
Model answer
(a) Bank interest charged → update the cash book. (b) Outstanding lodgement → bank reconciliation statement. (c) Standing order → update the cash book. (d) Unpresented cheque → bank reconciliation statement.
Why this scores
Marking (point-based, 4). 1 mark each. Bank-known items update the cash book; timing differences go in the statement.
Question 2
9706 Paper 2 style5 marks
Q (5 marks). A cash book shows a debit balance of $6,000. The bank statement reveals: bank charges$ 120; a direct debit of $450; a credit transfer received of$ 2,000. Calculate the updated cash book balance.
Model answer
Updated cash book balance: = 6,000 + 2,000 (credit transfer) − 120 (charges) − 450 (direct debit) = $7,430 (debit).
Why this scores
Marking (point-based, 5). Add credit transfer $2,000 (1.5); deduct charges$ 120 (1) and direct debit $450 (1); answer$ 7,430 (1.5).
Question 3
9706 Paper 2 style5 marks
Q (5 marks). The updated cash book balance is $7,430 (debit). Unpresented cheques total$ 1,100 and outstanding lodgements total $1,800. Prepare the bank reconciliation statement to find the bank statement balance.
Model answer
Bank reconciliation statement

$
Balance per updated cash book 7 430
Add: unpresented cheques 1 100
Less: outstanding lodgements (1 800)
Balance per bank statement 6 730
Why this scores
Marking (point-based, 5). Start from updated cash book (1); add unpresented $1,100 (1.5); deduct lodgements$ 1,800 (1.5); statement balance $6,730 (1).
Question 4
9706 Paper 2 style6 marks
Q (6 marks). A cash book shows a debit balance of $5,200. The bank statement reveals: charges$ 70; a dishonoured cheque $350; interest received$ 50. Unpresented cheques total $900; outstanding lodgements total$ 1,250. Calculate (a) the updated cash book balance and (b) the bank statement balance.
Model answer
(a) Updated cash book balance: = 5,200 + 50 (interest received) − 70 (charges) − 350 (dishonoured cheque) = $4,830 (debit).

(b) Bank reconciliation statement:

$
Balance per updated cash book 4 830
Add: unpresented cheques 900
Less: outstanding lodgements (1 250)
Balance per bank statement 4 480
Why this scores
Marking (point-based, 6). Updated cash book $4,830 (3); reconciliation add$ 900 / deduct $1,250 (2); statement$ 4,480 (1).
Question 5
9706 Paper 2/3 style6 marks
Q (6 marks). After updating, a business's cash book shows a credit (overdrawn) balance of $1,500. Unpresented cheques total$ 700 and outstanding lodgements total $1,100. Prepare the bank reconciliation statement to find the bank statement balance.
Model answer
For an overdraft, the signs reverse.

Bank reconciliation statement

$
Balance per updated cash book (overdrawn) (1 500)
Less: unpresented cheques (700)...

Working: start overdrawn 1,500; deduct unpresented cheques 700 → overdraft reduces to 800; add outstanding lodgements 1,100 → overdraft 1,900.

Balance per bank statement = $1,900 overdrawn.
Why this scores
Marking (point-based, 6). Recognise overdraft reverses signs (2); deduct unpresented $700 (1.5); add lodgements$ 1,100 (1.5); statement $1,900 overdrawn (1).
Question 6
9706 Paper 3 style6 marks
Q (6 marks). A cash book shows a debit balance of $8,000. The bank statement shows charges of$ 110 not yet recorded. A payment of $540 had been entered in the cash book as$ 450 in error. Unpresented cheques total $1,000; outstanding lodgements total$ 1,300. Calculate (a) the updated cash book balance and (b) the bank statement balance.
Model answer
(a) Updated cash book balance:

Correct the error: the payment was understated by 540 − 450 = 90, so reduce the cash book by $90.

= 8,000 − 110 (charges) − 90 (error) = $7,800 (debit).

(b) Bank reconciliation statement: = 7,800 + 1,000 (unpresented) − 1,300 (outstanding lodgements) = $7,500 bank statement balance.
Why this scores
Marking (point-based, 6). Error correction − $90 (2); charges −$ 110 (1); updated $7,800 (1); reconcile to$ 7,500 (2).
Question 7
9706 Paper 2/3 style4 marks
Q (4 marks). Explain which balance — the original cash book, the updated cash book, or the bank statement — should appear in the statement of financial position, and why.
Model answer
The updated cash book balance should appear in the statement of financial position.

The original cash book is incomplete — it omits items such as bank charges, interest, direct debits and dishonoured cheques that the business had not yet recorded. The bank statement reflects the bank's position, including timing differences (unpresented cheques, outstanding lodgements) that the business has already correctly recorded.

Only the updated cash book records all the business's transactions to date, so it gives the true bank balance (an asset, or an overdraft liability) to report in the statement of financial position.
Why this scores
Marking (point-based, 4). Updated cash book is the answer (1); original is incomplete (1.5); statement reflects timing differences (1.5).
Question 8
9706 Paper 3 style6 marks
Q (6 marks). Explain the benefits to a business of preparing a bank reconciliation statement regularly.
Model answer
Independent check. Reconciling the cash book to the bank statement checks the business's record against an independent external record prepared by the bank, which the business did not produce.

Detects errors. It reveals errors in the cash book (and occasionally the bank's errors), which can then be corrected.

Keeps the records complete. It identifies bank items not yet recorded — charges, interest, direct debits, credit transfers and dishonoured cheques — so the cash book (and hence profit and the bank balance) is correct and up to date.

Detects and deters fraud. A reconciliation, especially when prepared by someone other than the cashier (segregation of duties), can reveal takings recorded but not banked, helping to detect and deter theft.

Conclusion. Regular bank reconciliation greatly improves the accuracy and reliability of the cash records, though (like any control) it gives reasonable, not absolute, assurance.
Why this scores
Marking (point-based, ~6). Independent check (~1.5); detects errors (~1); identifies unrecorded bank items (~1.5); fraud detection/deterrence (~1.5); conclusion (~0.5).
Question 9
9706 Paper 3 evaluation style5 marks
Q (5 marks). Discuss the limitations of relying on a bank reconciliation statement to ensure the cash records are accurate.
Model answer
A bank reconciliation is a useful check, but it has limitations:

It only checks the bank account, not the rest of the books — errors elsewhere are not revealed.

It may not detect an error that affects both the cash book and the bank in the same way, or a transaction omitted from both records.

It relies on the bank statement being accurate and on the reconciliation being done regularly and competently; an infrequent or careless reconciliation gives little assurance.

It could be defeated by collusion between the cashier and the person reconciling.

Conclusion. A bank reconciliation gives reasonable, not absolute, assurance over the cash book; it should be combined with other controls (e.g. segregation of duties, control accounts, supervision) to be effective.
Why this scores
Marking (point-based, ~5). Only checks the bank account (~1); misses errors omitted from both / affecting both (~1.5); relies on accuracy/regularity (~1); collusion (~0.5); reasonable-not-absolute conclusion (~1).
Question 10
9706 Paper 2 style5 marks
Q (5 marks). The bank statement shows a balance of $9,200. Unpresented cheques total$ 1,500 and outstanding lodgements total $1,100. Calculate the updated cash book balance, and state which figure appears in the statement of financial position.
Model answer
Working back from the bank statement to the cash book reverses the add/deduct signs:

Updated cash book balance = 9,200 − 1,500 (unpresented cheques) + 1,100 (outstanding lodgements) = $8,800 (debit).

The updated cash book balance of $8,800 is the figure shown as the bank balance (a current asset) in the statement of financial position.
Why this scores
Marking (point-based, 5). Reverse the signs from the statement (1); deduct unpresented $1,500 (1.5); add lodgements$ 1,100 (1.5); updated cash book $8,800 to the SOFP (1).

	$
Balance per updated cash book	7 430
Add: unpresented cheques	1 100
Less: outstanding lodgements	(1 800)
Balance per bank statement	6 730

	$
Balance per updated cash book	4 830
Add: unpresented cheques	900
Less: outstanding lodgements	(1 250)
Balance per bank statement	4 480

	$
Balance per updated cash book (overdrawn)	(1 500)
Less: unpresented cheques	(700)...

Key Definitions and Keywords — Bank Reconciliation Statements

Definitions to memorise and the exact keywords mark schemes credit for bank reconciliation statements answers — sharpened from recent examiner reports for the 2026 Cambridge IGCSE sitting.

Bank reconciliation statement
Examiner keyword
A statement reconciling the updated cash book balance to the bank statement balance by adjusting for timing differences.
Unpresented cheque
Examiner keyword
A cheque written and recorded by the business but not yet presented/cleared by the bank; added in the reconciliation (for a positive balance).
Outstanding lodgement (uncredited deposit)
Examiner keyword
Money banked and recorded by the business but not yet processed by the bank; deducted in the reconciliation (for a positive balance).
Direct debit / standing order
Examiner keyword
Payments made automatically by the bank; recorded by updating the cash book (deducted) when found on the statement.
Credit transfer
An amount received directly into the bank account; recorded by updating the cash book (added) when found on the statement.
Dishonoured cheque
Examiner keyword
A cheque not paid by the bank; recorded by updating the cash book (deducted) when found on the statement.
Updated (corrected) cash book balance
Examiner keyword
The cash book balance after recording bank-known items and correcting errors; the figure shown in the statement of financial position.

Common Mistakes and Misconceptions — Bank Reconciliation Statements

The traps other students keep falling into on bank reconciliation statements questions — taken from recent Cambridge IGCSE examiner reports and mark schemes — and how to avoid them.

✕Entering unpresented cheques / lodgements in the cash book
9706 Examiner Reports
Why it happens
Treating them like bank-known items.
How to avoid it
Timing differences are already correctly recorded in the cash book; they go ONLY in the reconciliation statement.
✕Getting the add/deduct direction wrong
9706 Examiner Reports
Why it happens
Not thinking which record is ahead.
How to avoid it
From a positive cash-book balance: ADD unpresented cheques, DEDUCT outstanding lodgements to reach the statement.
✕Not reversing the signs for an overdraft
9706 Examiner Reports
Why it happens
Applying the positive-balance rules.
How to avoid it
For an overdraft (credit cash-book balance), DEDUCT unpresented cheques and ADD outstanding lodgements.
✕Using the bank statement balance in the SOFP
9706 Examiner Reports
Why it happens
Assuming the bank's figure is correct.
How to avoid it
The UPDATED cash book balance appears in the statement of financial position, not the bank statement balance.
✕Correcting cash-book errors in the reconciliation statement
9706 Examiner Reports
Why it happens
Confusing errors with timing differences.
How to avoid it
Cash-book errors are corrected by UPDATING the cash book (Step 1), not in the reconciliation statement.
✕Forgetting to record bank charges/interest in the cash book
9706 Examiner Reports
Why it happens
Treating them as the bank's concern.
How to avoid it
Bank charges, interest, direct debits and dishonoured cheques are genuine transactions — update the cash book for them.

Bank Reconciliation Statements

Detailed Study Notes

At a glance

What you’ll learn

Quick recap

Memorise this

How it’s examined

Take this whole topic with you

1Cash book update or reconciliation? (5 marks)

2Update the cash book (5 marks)

3Prepare the reconciliation statement (5 marks)

4Full reconciliation (6 marks)

5Overdraft reconciliation (6 marks)

6Reconciliation with a cash-book error (6 marks)

7Work back to the cash book balance (5 marks)

8Which balance for the SOFP? (4 marks)

9Benefits of bank reconciliation (4 marks)

10Detecting fraud via reconciliation (5 marks)

Bank reconciliation statement

Unpresented cheque

Outstanding lodgement (uncredited deposit)

Direct debit / standing order

Credit transfer

Dishonoured cheque

Updated (corrected) cash book balance

✕Entering unpresented cheques / lodgements in the cash book

✕Getting the add/deduct direction wrong

✕Not reversing the signs for an overdraft

✕Using the bank statement balance in the SOFP

✕Correcting cash-book errors in the reconciliation statement

✕Forgetting to record bank charges/interest in the cash book