“A false balance is abomination to the LORD: but a just weight is his delight.” — Proverbs 11:1
Lesson
What You Will Learn
- Read a business bank statement
- Identify deposits in transit, outstanding checks, and bank charges
- Complete a bank reconciliation
- Correct the books after reconciling
Lesson Notes
Why Reconcile?
Your cash book and the bank's statement should tell the same story, but timing and errors make them differ. A bank reconciliation compares the two and explains every difference. It catches mistakes, missed fees, and fraud early. Reconcile every month as soon as the statement arrives.
What Causes Differences
- Deposit in transit: money you recorded but the bank had not posted by the statement date.
- Outstanding check: a check you wrote and recorded that has not cleared the bank yet.
- Bank fees or interest: amounts the bank recorded that you did not know about yet.
- Errors: a wrong amount in your book (or, rarely, at the bank).
Worked Example
Joy's bank statement ends April 30 with $812.45. Her cash book shows $796.30. (Joy is a composite example.)
Bank side: $812.45 + deposit in transit $90.00 − outstanding checks ($64.15 + $50.00 = $114.15) = $788.30.
Book side: $796.30 − monthly bank fee $8.00 (on the statement, not yet in her book) = $788.30.
Both sides match at $788.30, so the account is reconciled. Joy then records the $8.00 fee in her cash book.
When It Doesn't Match
Check each deposit and payment against the statement and tick them off. Look for amounts in the wrong column, transposed digits, and missed fees. Never force the books to match by inventing an entry. If you cannot find the difference, ask for help.
Key Terms
| Item | Details |
|---|---|
| Bank reconciliation | Matching the cash book to the bank statement and explaining every difference |
| Deposit in transit | A deposit recorded in your book but not yet on the statement |
| Outstanding check | A check written but not yet cleared |
| Adjusted balance | The balance after reconciling items are applied |
In-Class Activities
Tick and Match
Compare the sample cash book to the sample bank statement. Tick each item that appears on both. Circle items that appear on only one, and label each circled item: deposit in transit, outstanding check, bank fee, or error.
Reconciliation Worksheet
Statement ending balance: $1,240.60. Deposit in transit: $150.00. Outstanding checks: $85.00 and $42.30. Cash book balance: $1,295.30. The statement shows a $5.00 service fee not in the book. A $63.00 check was recorded in the book as $36.00.
Complete the bank side and the book side. Do they match?
Assignment: Reconcile the Account
Complete a reconciliation with this information:
- Statement ending balance: $2,015.40
- Deposit in transit: $210.00
- Outstanding checks: #311 for $120.00 and #314 for $75.25
- Cash book balance: $2,046.15
- On the statement but not in the book: a $12.00 monthly fee and a $4.00 check-printing charge
Show both sides, state whether they match, and write the entries you would add to the cash book.
Graded with the Module Assignment Rubric.
Reflection Journal
Proverbs 11:1 says a false balance is an abomination to the Lord, but a just weight is His delight. Reconciling is checking the scales. Where in your life do you need to check that what you say matches what is true?
Prayer focus: Ask God for a just weight in every part of your life and courage to correct what is wrong.
Weekly Reading & Devotions
Checking the Scales
In Bible times, merchants weighed goods on scales. A dishonest merchant used a false weight to cheat customers. Proverbs 11:1 says, A false balance is abomination to the LORD: but a just weight is his delight. God cares about accurate measures.
A bank reconciliation is how a business checks its scales. You compare your cash book to the bank statement and explain every difference. Some differences are timing: a deposit not yet posted or a check not yet cleared. Some are surprises: a bank fee you did not know about. Some are errors.
The temptation, when the numbers will not match, is to force them. Add a made-up entry and move on. But a forced balance is a false balance. It hides the very problems reconciling is meant to catch. Honest reconciling means searching until you find the answer, or asking for help.
When the two sides finally match, there is real peace. You know your true cash balance. You know your records are right. That peace is worth the effort every month.
Think About It
- Why might someone be tempted to force the books to match? ______________________
- Who could you ask for help if you got stuck? ______________________
- Where else in life do you need to check the scales? ______________________
Daily Devotions for Week 5
A Just Weight
A false balance is abomination to the LORD: but a just weight is his delight.— Proverbs 11:1 (KJV)
God delights in honest measures. Accurate books bring Him joy.
Reflect: Where do you need a just weight?
Pray: Lord, make my measures true.
Do: Tick off five practice items against a statement.
The Lord's Balances
A just weight and balance are the LORD'S: all the weights of the bag are his work.— Proverbs 16:11 (KJV)
Honest measures belong to God. When we keep them, we reflect His character.
Reflect: How does honesty reflect God's character?
Pray: Lord, let my work reflect You.
Do: Find one difference in a practice reconciliation.
Examine Yourselves
Examine yourselves, whether ye be in the faith; prove your own selves.— 2 Corinthians 13:5 (KJV)
Regular self-examination keeps our faith honest, just as reconciling keeps our books honest.
Reflect: What do you need to examine?
Pray: Lord, help me examine myself honestly.
Do: Review last week's practice cash book for errors.
Search Me
Search me, O God, and know my heart: try me, and know my thoughts:— Psalm 139:23 (KJV)
We invite God to search us, as we search our records for the truth.
Reflect: What would you ask God to search in you?
Pray: Lord, search me and know my heart.
Do: Spend five quiet minutes in prayer before your assignment.
Faithful to Forgive
If we confess our sins, he is faithful and just to forgive us our sins, and to cleanse us from all unrighteousness.— 1 John 1:9 (KJV)
When we find a mistake, we correct it openly. When we confess sin, God forgives and cleanses.
Reflect: What do you need to bring into the open?
Pray: Lord, thank You for Your faithful forgiveness.
Do: Make one honest correction, in your books or in a relationship.
Module Quiz
- 1.
A check you wrote that has not cleared the bank is:
- 2.
Statement balance $500.00, deposit in transit $60.00, outstanding check $40.00. The adjusted bank balance is:
- 3.
A bank fee shown on the statement but not in your book should be:
- 4.
If the books do not match, it is acceptable to add a made-up entry to make them match.
- 5.
Why should a business reconcile its bank account every month?