IGCSE Accounting: Bank reconciliation (Cambridge 0452) – Revision Notes

Syllabus edition note. This resource follows the Cambridge IGCSE Accounting 0452 syllabus (and Cambridge O Level Accounting 7707, which has the same subject content for the same series) for exams in 2027, 2028 and 2029 (version 1), first examined in the March 2027 series in India and the June 2027 series elsewhere. If you sit 0452 in November 2026, you sit the 2026 syllabus (version 2), which differs: Paper 1 has 35 multiple-choice marks in 1 hour 15 minutes, not 40 marks in 1 hour 30 minutes; Topic 7 is “Accounting principles and policies”, without 7.2 Ethical considerations or 7.3 Technology and sustainability; 4.4 is “Irrecoverable debts and provision for doubtful debts”; income statements are named instead of statements of profit or loss; three-column running balance accounts are not required; Clubs and societies is 5.4 and Manufacturing accounts 5.5; and 6.3 is “Inter-firm comparison”. For this topic, the 2026 syllabus also lists dividends among the cash book updates, and it does not include the impact of digital transactions on bank reconciliation or on control accounts. If you sit in November 2026, work from the 2026 syllabus on the Cambridge International website.

Quick-recall notes for syllabus section 3.3 Bank reconciliation in Cambridge IGCSE Accounting 0452 (exams in 2027, 2028 and 2029). Full explanations and a longer worked example are in the study guide. Test yourself with the practice questions, and see the wider Verification of accounting records notes for the other three parts of Topic 3. Course pages: Cambridge IGCSE Accounting hub, printable checklist and the free diagnostics.

3.3 at a glance

Syllabus point	One-line summary
Use and purpose of a bank statement	An outside record of the account, used to check the cash book
Update the cash book	Enter what the bank knows and you do not, and fix your own mistakes
Bank reconciliation statement	Explain the gap that remains: unpresented cheques, uncredited deposits, bank errors
Digital business transactions	Faster clearing and easier checking, but the cash book still needs updating

Key terms

Term	Meaning
Bank statement	A running list, produced by the bank, of money paid in and out
Cash book (bank column)	The firm’s own ledger of what it believes is in the account
Credit transfer	Money paid into your account directly, with no cheque, for example by a customer
Direct debit	A payment collected from your account by another party, with the amount set by them
Standing order	A fixed payment your bank makes on dates you have set
Unpresented cheque	Issued and entered in the cash book, not yet paid by the bank
Uncredited deposit	Paid in and entered in the cash book, not yet added by the bank (an outstanding lodgement)
Bank error	A mistake made by the bank, for example a payment charged to the wrong account
Bank reconciliation statement	A list that explains the difference between the updated cash book balance and the statement balance

Method in three steps

1. Tick off the cash book against the statement. Unticked items on the statement are for the cash book. Unticked items in the cash book are timing differences or errors to investigate.
2. Update the cash book with the items in the table below and find the new balance.
3. Reconcile. Start with the updated cash book balance, add and deduct the remaining differences, and finish on the statement balance.

Updating the cash book

Item on the statement	Cash book side
Bank charges	Credit
Bank interest paid	Credit
Bank interest received	Debit
Credit transfer received	Debit
Direct debit	Credit
Standing order	Credit
Cash book recorded too much received, or too little paid	Credit the difference (it reduces the balance)
Cash book recorded too little received, or too much paid	Debit the difference (it raises the balance)

Quick check: money in goes on the debit side and money out goes on the credit side, always from the business’s point of view.

Reminder example. A business’s cash book shows a balance of 1,840. The statement shows charges of 22, interest received of 6, a direct debit of 75, a standing order of 130 and a credit transfer of 410. Updated balance: 1,840 − 22 + 6 − 75 − 130 + 410 = 2,029.

Reconciling: which sign?

Item	Cash book to statement	Statement to cash book
Unpresented cheque	Add	Deduct
Uncredited deposit	Deduct	Add
Bank charged you in error	Deduct	Add
Bank credited you in error	Add	Deduct

Each row in the third column is the opposite of the second. Use one direction per question.

Reminder example, starting from the statement. Alderwick Print’s statement shows 2,310. An uncredited deposit of 900 is not on it, cheques of 310 and 265 are unpresented, and the bank has credited 120 to the account in error.

Reconciliation	Amount
Balance per bank statement	2,310
Add: uncredited deposit	900
	3,210
Less: unpresented cheques (310 + 265)	575
	2,635
Less: bank error	120
Balance per updated cash book	2,515

If this had started from the cash book instead, the signs would reverse and the answer would end on 2,310.

Overdrawn. If the cash book or statement shows an overdraft, give it a minus sign and use the same rules. Overdraft interest and charges go on the cash book credit side.

Digital business transactions

• Payments by card, online payment and bank transfer clear quickly, so fewer unpresented cheques and uncredited deposits remain.
• Online banking lets a business check its account every day, so it finds errors and unauthorised payments sooner.
• Reconciliation software can match the bank feed to the records, which cuts routine work.
• Direct debits, standing orders, charges and interest still reach the statement first.
• A person must still review unmatched items, duplicates and wrongly keyed amounts.

Must-know distinctions

• Unpresented cheque or uncredited deposit? Cheque out, not yet cleared, versus money in, not yet credited. Both are in the cash book already.
• Cash book error or bank error? You correct the first in the cash book and report the second to the bank.
• Standing order or direct debit? Your bank pays the first on your instruction. The second is collected by the other party.
• Credit transfer or deposit? The first arrives with no action from you and is often found on the statement first. The second is a lodgement you make and record yourself.
• Updating or reconciling? Updating changes the cash book. Reconciling changes nothing; it only explains.

Where marks are usually lost

• Beginning the reconciliation before the cash book has been brought up to date.
• Placing bank charges or a direct debit on the debit side.
• Entering unpresented cheques or uncredited deposits in the cash book a second time.
• Adding when you should deduct, because the direction was not fixed at the start.
• Treating the bank’s mistake as something to enter in the cash book.
• Not showing the balance reached at each stage, so one slip hides the rest of the working.
• Giving only one effect of digital payments when the question asks for two.
• Writing “the bank made a mistake” with no statement of what happens to the cash book or to the statement balance.

Quick self-test

1. On which side of the cash book are bank charges entered?
2. Define an unpresented cheque.
3. The updated cash book shows 2,500, there are unpresented cheques of 600 and an uncredited deposit of 350, and there are no errors. What is the statement balance?
4. The statement shows 1,900, an uncredited deposit of 400 is missing from it and cheques of 250 are unpresented. What is the cash book balance?
5. State one difference between a standing order and a direct debit.
6. The bank adds a customer’s payment of 300 to your account by mistake. Is the statement balance too high or too low, and is the cash book changed?
7. Interest received of 18 appears on the statement only. On which side of the cash book does it go?
8. A cheque for 270 was entered in the cash book as 720. What correcting entry is needed?
9. Give two ways that digital payments affect bank reconciliation.
10. Why is a bank statement a useful check on the cash book?

Answers

1. Credit.
2. A cheque the business has issued and entered in its cash book that the bank has not yet paid.
3. 2,500 + 600 − 350 = 2,750.
4. 1,900 + 400 − 250 = 2,050.
5. For example: the business instructs its bank to make a standing order for a fixed amount, whereas a direct debit is collected by the other party and the amount can vary.
6. Too high. The cash book is not changed; the bank is told and the item appears on the reconciliation statement.
7. Debit.
8. Debit the cash book with 450, because the payment was overstated by 720 − 270.
9. Any two of: faster clearing and fewer timing differences; more frequent checking; software matching; errors and duplicates found sooner. Items such as charges and direct debits still need entering.
10. It is produced independently of the business, so it can reveal omissions, errors and unauthorised payments.

Frequently asked questions

What are the three steps in a bank reconciliation? First tick off items that appear in both the cash book and the bank statement. Then update the cash book for items found only on the statement and any cash book errors, and finally prepare the reconciliation statement for the remaining timing differences and bank errors.

What does a favourable balance on a bank statement mean? A favourable balance is money the bank holds for the business. Read the column words and the direction of the money, because a statement may use debit and credit from the bank’s own point of view.

Is a cash book error corrected on the bank reconciliation statement? No. An error in the cash book is corrected in the cash book itself. Only bank errors and timing differences appear on the reconciliation statement.

Why should you show the balance at each stage of a reconciliation? Showing the balance reached after each adjustment makes the working easy to follow, so one slip does not hide the rest of the answer and method marks can still be earned.

Official syllabus

Cambridge IGCSE Accounting 0452 syllabus for exams in 2027, 2028 and 2029 (version 1), published by Cambridge University Press & Assessment (Cambridge International Education). Section 3.3 Bank reconciliation.