Bank reconciliation difference: find what's causing it

A difference of $270 doesn't necessarily mean one $270 transaction is missing. Several mistakes can add up to the same number. Keep your first report, then work through the evidence in a fixed order so you don't fix one entry and accidentally undo another.

This guide tackles one out-of-balance account. For the wider weekly and month-end job, use the DIY bookkeeping routine.

Confirm which two balances disagree

Your software can show both an imported statement balance and an accounting balance. First check whether its statement lines reproduce the bank's own statement. Then check whether your recorded transactions reconcile to those lines. A feed full of matched items doesn't prove the opening balance or imported data is complete.

Download the bank's statement for the period. Use the actual closing balance, not an available balance that includes an overdraft facility or pending card authorisations. Confirm the account number, currency and cut-off date. Export the ledger and reconciliation report using that same date.

Xero's statement-balance guidance identifies opening balances and imported statement lines as places to investigate when its statement balance differs from the bank's. Treat that check separately from whether you've coded each entry correctly.

Work through three planted discrepancies

The following fictional example ignores GST to keep the bank arithmetic visible. All figures are dollars. The period closes on 30 June; the ledger contains three mistakes, plus one legitimate outstanding payment.

Item	Bank statement	Uncorrected ledger	Investigation
Opening balance	$5,000	$4,900	1. Ledger starts $100 too low.
Customer receipt	+$1,100	+$1,100	Agrees.
Supplier payment	−$330	−$330 twice	2. One extra $330 ledger entry.
Service receipt	+$220 on 30 June	Absent; dated 1 July	3. Investigate the recorded receipt date.
Unpresented cheque	Not yet cleared	−$150	Timing item, supported by cheque record.
Closing balance	$5,990	$5,190	$800 raw difference.

After evidence-based corrections: $5,190 + $100 + $330 + $220 = $5,840 in the ledger. The bank's $5,990 less the $150 outstanding cheque also equals $5,840.

Original ASBG example. The remaining $150 is explained by timing; it isn't a fourth error. No software screen is depicted.

1. Trace the opening $100. Compare the previous period's signed-off reconciliation with the opening figure. If the mismatch began at migration, stop adjusting current expenses and check the opening balances. An accountant's later journal may explain a change; get the journal before overriding it.

2. Prove the duplicate $330. Find both ledger IDs and the single bank debit. One might be a bill payment and the other a separately created expense. Correct the unnecessary entry using the software's supported workflow, preserving the bill and its payment. If there are two real debits, you've found a payment problem instead.

3. Check the $220 date. The example assumes the bank and remittance establish a 30 June receipt and someone typed 1 July by mistake. Correct that documented mistake. Don't move a legitimate July transaction into June merely because it makes the total work.

Narrow a larger file by date, then amount

Find the last statement date that agrees. Compare at an intermediate date to reduce the interval, then check each line in the remaining gap. Look for a reversed sign, a missing fee, an overlapping import, or a payment matched to the wrong invoice. Search both the amount of the difference and its components; equal errors can also cancel each other out.

Use an exception log with columns for transaction ID, amount, bank date, ledger date, evidence, proposed action and person responsible. For example: “Entry L-204, $330, duplicate of bill payment P-98; bank shows one debit; bookkeeper to reverse duplicate and rerun June reports.” That is useful evidence. “Adjusted to balance” isn't.

Finish with an explained balance

Rerun the reconciliation after each correction. Save the final report with the exception log and evidence that outstanding items clear later. Review any item that remains outstanding for an unexpectedly long time.

If the period has been reported in a business activity statement (BAS), have the agent check the tax impact before changing it. Also escalate unexplained opening entries, suspected unauthorised payments or repeated mismatches across accounts. The final bank balance should also agree with the bank account shown on your balance sheet for that date.

Key takeaways

• Establish the date and opening balance before hunting through transactions.
• Record timing items separately from errors and confirm they clear.
• A zero difference is useful only when the entries behind it are supported.

Where to get help

Use Xero's bank-balance troubleshooting for the software check, or give your bookkeeper the statement, ledger and exception log together. The bookkeeping and BAS collection has the next steps for specific transaction problems.