Is a bank reconciliation statement filed with the government?

A BRS is generally an internal accounting record and is not filed as a separate GST or income-tax return. However, it may be requested during an audit, loan review or tax assessment.

What should I do if a customer pays more than the invoice amount?

First confirm whether the extra amount relates to another invoice, an advance or a duplicate payment. If it cannot yet be allocated, record it as a customer advance or unallocated receipt instead of treating the full amount as sales.

What should I do when a customer pays from a different person’s bank account?

Do not allocate the receipt using only the amount. Ask the customer for the bank reference number and invoice details. Keep the receipt unallocated until you have enough information to identify it correctly.

How should a failed or reversed UPI transaction be recorded?

Keep both the original transaction and the reversal in your records. Check whether the customer was actually debited and whether a fresh payment was later received. Do not delete one entry simply because the other appears.

What happens when a customer’s cheque is returned?

Record the cheque return, reopen the customer invoice if it was marked paid, and enter any bank charges separately. Keep the bank-return advice as supporting evidence.

How should a personal payment made from the business bank account be recorded?

Do not show it as a business expense. A sole proprietor would generally record it as drawings. A company, partnership or other entity may require a different account, so the treatment should follow the entity’s accounting policy.

Should each business bank account be reconciled separately?

Yes. Reconcile each bank account separately using its own ledger and statement. Combining several accounts can hide missing entries or cause payments to be matched against the wrong bank balance.

How long should bank reconciliation records be kept?

The period depends on the laws that apply to your business. GST-registered businesses must generally keep the required GST records for 72 months from the due date of the relevant annual return. Companies must generally retain their books and supporting vouchers for at least eight preceding financial years. Keep records longer when an assessment, appeal or investigation is pending.

Bank Reconciliation and Payment Matching: Simple Process for Small Businesses

Your bank statement may show one balance, your books may show another, and a customer invoice may still appear unpaid even though money has reached your account. These are related problems, but they do not always have the same cause.

This guide is for small-business owners in their first one to three years of business who need to identify missing bank entries and link receipts with the correct invoices.

Pankaj Malhotra 11 August 2026 7 min read

Quick summary

Bank reconciliation compares your bank statement with the bank account recorded in your books.
A bank reconciliation statement explains why the two balances are different on a particular date.
Payment reconciliation matches each receipt or payment with the correct invoice, bill or advance.
Reconcile regularly so missing entries, incorrect customer balances and unidentified payments do not build up.

What is Bank Reconciliation?

Bank reconciliation means comparing the bank account in your books with the bank statement for the same period. The aim is to identify why the balances differ. You may find:

a transaction that the bank has recorded but you have not;
an entry in your books that has not yet appeared in the statement;
a duplicate or incorrect entry.

A difference does not always mean that someone has made a mistake. Some transactions appear on different dates because of processing time. However, every difference should still be identified and explained.

Bank Reconciliation vs Payment Reconciliation

Area	Bank reconciliation	Payment reconciliation
Main question	Does the bank balance in the books agree with the bank statement?	Which invoice or bill does this payment belong to?
Records checked	Bank ledger and bank statement	Payment, customer or supplier account, and invoice or bill
Main result	The balance difference is explained	The correct invoice or bill is marked paid
Common problem	Bank charges are missing from the books	A customer has paid, but the invoice still appears unpaid

Area

Main question

Bank reconciliation

Does the bank balance in the books agree with the bank statement?

Payment reconciliation

Which invoice or bill does this payment belong to?

Area

Records checked

Bank reconciliation

Bank ledger and bank statement

Payment reconciliation

Payment, customer or supplier account, and invoice or bill

Area

Main result

Bank reconciliation

The balance difference is explained

Payment reconciliation

The correct invoice or bill is marked paid

Area

Common problem

Bank reconciliation

Bank charges are missing from the books

Payment reconciliation

A customer has paid, but the invoice still appears unpaid

A bank account may reconcile even when a receipt has been linked to the wrong customer or invoice. Both checks are therefore necessary.

Common Reasons for Bank Reconciliation Differences

Timing differences

A payment may be recorded in your books before it appears in the bank statement, or the bank may record it before you enter it. Examples include:

a cheque deposited near the end of the month but not yet credited;
a cheque issued but not yet presented;
a card or payment-gateway settlement still being processed; or
a transfer initiated close to the statement closing date.

These are timing differences. They should be monitored, but the transaction should not be recorded twice.

Missing or incorrect entries

The bank may record a transaction that has not yet been entered in your books. Common examples include bank charges, interest, loan instalments, automatic debits and direct customer deposits. Your books may also contain duplicate or incorrect entries, such as:

a duplicated receipt;
an incorrect amount;
a transaction posted to the wrong bank account; or
a receipt entered under the wrong customer.

How to Reconcile a Bank Statement

Follow these steps using your books and bank statement for the same period.

1. Select the period

Choose a clear start and closing date, such as 1 July to 31 July. Download the complete bank statement for this period and open the bank account recorded in your books or accounting software. Do not compare a full-month ledger with an incomplete bank statement.

2. Check the opening balance

The opening balance should agree with the closing balance from the previous completed reconciliation. If the balances do not agree, check whether:

a previous entry was changed or deleted;
a backdated transaction was added;
the earlier reconciliation was incomplete; or
the opening balance was entered incorrectly.

3. Match the transactions that agree

Compare each bank-statement entry with your books. Check the date, amount, customer or supplier name, bank reference number, and invoice or bill number, where available. Do not match transactions using only the amount. Two customers may pay the same amount on the same day.

4. Separate the unmatched entries

Separate unmatched transactions into timing differences, missing entries, incorrect entries, reversals and unidentified payments so you know what action each one requires.

5. Record or correct the entries

Record genuine transactions that the bank has processed but your books do not show, such as bank charges, interest and direct customer payments. Correct duplicate entries, wrong amounts and incorrect customer allocations. Keep a clear record of the correction instead of deleting entries simply to make the balances agree.

6. Confirm the reconciled balance

After recording corrections, confirm that the adjusted book balance agrees with the bank statement after allowing for genuine timing differences. List any remaining timing items in the BRS and review old unmatched entries separately.

Bank Reconciliation Statement Example

Suppose a retailer’s books show a bank balance of ₹1,00,000 on 30 June, while the bank statement shows ₹96,500. The retailer finds three differences:

A cheque deposit of ₹5,000 was recorded in the books but had not yet appeared in the bank statement.
Bank charges of ₹500 appeared in the statement but had not been entered in the books.
A customer transferred ₹2,000 directly into the bank, but the receipt had not been recorded.

The reconciliation would look like this:

Bank reconciliation statement as at 30 June	Amount
Balance as per books before corrections	₹1,00,000
Less: Bank charges not recorded in the books	₹500
Add: Customer receipt not recorded in the books	₹2,000
Adjusted balance as per books	₹1,01,500
Less: Cheque deposited but not yet credited	₹5,000
Balance as per bank statement	₹96,500