Bank Reconciliation: Find the Variance

Find what a bank reconciliation variance is before you post anything

Step 8 of the bank reconciliation guide, first half: your closing balance and the bank’s still disagree, and you need to know why before you post anything. It comes after Steps 2 to 7, where Auto Matching paired what it could and you reviewed its suggestions, confirming the good ones and matching the rest by hand. GadgetSphere’s March 2026 session for GS-KV-01 still shows a RM 450 gap: RM 47,650 in BigLedger against RM 47,200.

The investigation is four questions in a fixed order:

Halve the possibilities by direction: which closing balance is larger.
Generate Report 1 before you post anything.
Split what is left into the four places it can hide, with Report 3.
Name every line that is left, with the table of causes.

Posting the fix is the second half of Step 8.

Step 8: Work out what the variance actually is, then post the fix that fits it

Bank Reconciliation > (your session) > Report > Report 1, then Manual Matching

This is the step that costs money when it goes wrong. Once you know the number, the temptation is to think of something that would explain it and post that. Resist it. A wrong explanation makes the two closing balances agree and leaves your books further out than they were when you started — and because the balances now agree, nobody looks again.

So find out what it is before you post anything. The investigation is four questions in a fixed order, and it works on any variance of any size.

First, halve the possibilities by direction

Compare your two closing balances and note which one is larger. That single fact halves the work, and it is the reason the orientation section asked you to write the direction down rather than just the amount.

If BigLedger is higher than the bank, arithmetically only two families of cause can do it:

Money in that you have and the bank does not — a receipt you recorded that the bank has not credited yet, a receipt recorded twice, or a receipt recorded for money that never actually arrived.
Money out that the bank has and you do not — a charge, interest, a direct debit or a standing instruction the bank took and nobody booked.

If the bank is higher than BigLedger, the mirror applies:

Money in that the bank has and you do not — a customer paying straight into the account, interest received, any direct credit nobody raised a receipt for.
Money out that you have and the bank does not — a cheque written but not yet presented, or a payment recorded that never actually left.

Half the possibilities are gone before you have opened a single screen. Anything you are about to consider that does not sit in one of those two families is not your variance — and a cause from the wrong list will move your books further apart, not closer.

In GadgetSphere’s case BigLedger says RM 47,650 and the bank says RM 47,200, so it is the first list.

Second, generate Report 1 before you post anything

Report 1 starts from the cashbook closing balance stored on the session, takes off your own unmatched lines, adds the bank’s unmatched lines, allows for the items matched into another period, and arrives at an Expected closing balance of the cashbook — what your cashbook would read if the bank were right about everything. It then sets that against the bank closing balance you typed. Each item it lists sits under a heading that names its side, so the list tells you which side each part of the difference is on, and it is your candidate list. Generate it now, while the books are still untouched. If you post first and generate afterwards, you have destroyed the evidence that would have told you whether the posting was right.

Read its Variance / discrepancy line for what it is. It is not the gap between your books and the bank: in GadgetSphere’s month it already reads RM 0, because the RM 450 is in the list as an unmatched bank line. The variance is whatever the listed items do not explain — a bank closing balance typed wrong, a statement upload that is missing rows, or a stored cashbook closing that is older than the cashbook lines (Step 4). If it is not zero before you have posted anything, find which of those it is first.

Make sure Auto Matching has finished before you generate, or the report is built on a half-finished match state and every number in it is provisional.

Third, split what is left into the four places it can hide

Generate Report 3 as well. Its sections divide the gap between your two closing balances between the two sides, and when Report 1’s variance is zero they account for all of it. Read them in this order, because the first two are usually not your problem at all:

Difference in opening of cashbook opening balance vs bank statement opening balance. If this is not zero, part or all of your variance was inherited from an earlier period. It did not happen in March and you will never find it in March — go back and settle February’s session first.
Matched with previous or future period, on either side. This is timing: real transactions, correctly recorded on both sides, that simply landed in different months. They need no entry at all. (The auto-matcher deliberately looks 90 days either side of your dates so it can pair them — Step 6.)
Cashbook transactions unmatched balance. Something you recorded that the bank does not show. Manual Matching > Reconcile lists the lines.
Bank transactions unmatched balance. Something the bank shows that you never recorded. Manual Matching > Bank Statement Lines lists them.

Most months, 1 and 2 account for nothing and the whole variance is in 3 or 4. When 1 is non-zero, stop and fix the earlier period — everything you do in March on top of an inherited difference is guesswork.

Fourth, name every line that is left

Now go line by line through what is still open in 3 and 4. Each line has one cause, and there are not many causes. This table is the whole of it — find the row that matches what you are looking at, confirm it the way the middle column says, and do what the last column says.

The line in front of you	What it usually is	How to confirm it	What to do about it
Your side: a payment or receipt with no partner on the statement, dated near the end of the period	Timing — the bank cleared it after your closing date	Look for it on next month’s statement, or in internet banking, dated after your closing date	Nothing. It is a genuine reconciling item, and Report 1 lists it as one. Posting anything here double-counts it
Your side: two lines with the same date, amount and payee, and the bank shows the transaction once	A duplicate document	Open both from the Document column; they are two separate document numbers for one real event	Void the duplicate source document, not the cashbook line and not a journal. If either copy is already matched, Unreconcile first — the server refuses to change a reconciled voucher’s amount
Your side: a line whose amount is close to a statement line but not equal	One transaction recorded at the wrong figure, or a bank fee deducted in transit	The payee and reference agree; only the amount differs	Match them partially — a link can settle part of a line — then explain the residue on its own merits. Usually it is a charge, which is the bank-side row below
Your side: a line that belongs to a different bank account	The settlement method on the source document points at another cashbook	Open the document and check its settlement method against Step 1’s list	Correct the settlement method on the document, unreconciling first if it is already matched. The line then leaves this cashbook
Your side: a line whose date is inside the period but whose bank entry is in a different month	Either a wrongly dated document, or ordinary timing	Compare the document’s own date with the date the bank shows	If the document date is wrong, fix it at source and re-save. If the bank simply cleared it in another month, it is timing — row 1
Your side: a line no statement will ever show, in any month	A rounding residue, or an amount written off	Nothing matches it on this or any later statement	Unmatched Adjustment on the line’s matching screen closes it on the reconciliation only — it posts nothing, so the accounting still needs a voucher or a journal of its own
Bank side: a debit or credit with a bank’s own description and no document anywhere	A charge, interest, a direct debit or a standing instruction you have not booked	Search the cashbook for the amount and the date; nothing comes back	Post it — as a voucher, never a manual journal. This is GadgetSphere’s case, and the rest of this step walks it
Bank side: a line that matches a document you know exists, but the document is nowhere on the Reconcile tab	Either the document is not FINAL, or it is FINAL and its cashbook posting never ran	Check the document’s posting status. If it is FINAL, run Financial Report > Error Checking > Trace Document on it and read the Missing Cashbook check	Set it FINAL, or click Resolve on that check, which writes the missing cashbook lines. Do not enter a second document — you would double-count
Bank side: a line you are sure you matched last week, back at its full amount	Someone voided the source document, or adjusted its settlement method, after you matched it	The cashbook line is gone and your calculated closing balance moved; nothing on the reconciliation screen announces it	The statement line is right; your side is what changed. Find the source document, read its posting statuses, and either match the replacement line or account for the void
Bank side: a credit from a customer with no receipt behind it	The customer paid straight into the account	The payor name on the statement is a customer, and no receipt voucher exists	Raise the Receipt Voucher against their invoice, so the receivable clears too. A bank-charges voucher would balance the cash and leave the customer still owing you
Bank side: a charge or transfer that is not yours at all	The bank has made an error	No document, no expectation, and nothing in your records anticipates it	Post nothing. Raise it with the bank and leave the line open. This month will not reconcile to zero, and it should not be made to

Two cautions belong beside this table. Unmatched Adjustment is not a way to shorten the list: it posts nothing, and using it to force a tidy Report 3 buries a real difference under a clean-looking one. Unreconcile before you void: a void of a matched document quietly undoes the match, and the bank line comes back open at its full amount. Both are explained on If it still does not resolve.

Two lines that never appear on this reconciliation at all, and are worth knowing about before you go looking for them: a manual journal to the bank account moves the General Ledger but writes no cashbook line, so it can never close a variance here; and a VOID cashbook line is excluded from the calculated balance rather than reversed by it.

Next: when every open line has a name, post only what needs posting.

What success looks like for this part

Every line still open on either side of Report 3 has a name from the table, and you know which need a new document, which need a correction at source and which need nothing. You have not posted anything yet.

Common mistakes

The two that cost most at this point sit beside the table above: using Unmatched Adjustment to shorten the list, and voiding a matched document before you unreconcile it. The mistakes of posting the fix are on Post the fix that fits the variance.