What is a bank reconciliation and why do it every month?
A bank reconciliation compares your accounting records with the bank statement and explains every difference. It catches errors, missing entries, duplicate payments and fraud early. Doing it monthly is a core control for any business.
The bank statement and your cash book rarely match on the same day. A reconciliation explains why.
Steps
- Take the closing balance on the bank statement
- Add deposits you have recorded that the bank has not yet credited (deposits in transit)
- Deduct cheques and payments you have recorded that have not cleared yet (outstanding payments)
- The result should equal the balance in your ledger
- Investigate and post any difference: bank charges, interest, direct debits, errors, or unrecorded receipts
Why monthly
- Shows unrecorded income and expenses
- Exposes duplicate or unauthorised payments quickly
- Provides support for the year-end cash figure
- Auditors and LHDN officers typically start by checking bank statements against the ledger
Tips
- Reconcile every account, including credit cards, loan accounts and foreign currency accounts
- Have someone other than the person making payments review the reconciliation
- Clear old unmatched items rather than carrying them for months
- Keep the signed or dated reconciliation with the month's records
Most accounting software can match bank feeds automatically, but a human still has to review them.
Legal basis
- Companies Act 2016, s.245
Sources
Applies to 2026 · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- How long must a Malaysian company keep its accounting records?A company must keep accounting records for seven years after the transactions they record were completed. For tax, documents must be kept for seven years from the end of the relevant year of assessment. Use whichever period ends later.
- How soon must transactions be recorded in the books?Under section 245 of the Companies Act 2016, entries must be made in the accounting records within 60 days after the transaction is completed. Leaving the books for a full year-end rush is therefore not compliant.
- What do a company's financial statements contain?A company's financial statements normally include a statement of financial position, a statement of profit or loss and other comprehensive income, a statement of changes in equity, a statement of cash flows and notes with accounting policies. The set must give a true and fair view.
- Who prepares and approves a company's financial statements?Directors are legally responsible for the financial statements. An in-house accountant or external firm often drafts them, but the board approves them by resolution and signs a directors' statement. The statements are then presented to the members.
- What is the difference between MPERS and MFRS?MFRS is the full set of Malaysian standards, aligned with IFRS, used by listed and regulated entities. MPERS is a shorter, simplified framework based on the IFRS for SMEs standard, designed for private entities. Both give a true and fair view; MPERS has fewer disclosures and simpler rules.