# Year End Bank Reconciliation: What Changes in Month 12

- Author: PreciseBankFlow (https://precisebankflow.com)
- Published: 2026-10-17
- Category: Bank reconciliation
- Canonical: https://precisebankflow.com/blog/year-end-bank-reconciliation

> What a year end bank reconciliation needs beyond a normal month: the cutoff, old open items, the support auditors request and the entries to post first.
A year end bank reconciliation is a normal month-end reconciliation with more riding on it. The cash figure feeds the annual accounts and the tax return, so the cutoff must be exact, stale open items must be resolved, book-side entries must be posted first, and the support must be ready for an auditor or reviewer to test.

## What makes a year end bank reconciliation different from month 11?

The year end bank reconciliation uses the same method as November's, but its result is used for more. It sets the cash balance in the annual financial statements, it closes the books for tax, and it becomes the opening point for next year. Errors that were tolerable as timing differences in month 11 become misstatements in month 12.

Four things change in practice:

- **Cutoff matters more.** A receipt or payment in the wrong year moves income or expenses between years, not just between months.
- **Old items need an answer.** An outstanding check that has sat for ten months is a liability question, not a timing item.
- **Entries come first.** Fees, interest and corrections found during the year must be in the ledger before the final reconciliation, so the books close on the right figure.
- **Someone else will look.** Auditors, reviewers, lenders or a tax preparer may each test the reconciliation, and they will ask for evidence you did not need in March.

None of this needs a different template. It needs a slower pass and a folder of support.

## Year-end cutoff for the bank reconciliation

Year-end cutoff means every receipt and payment is recorded in the fiscal year it belongs to. On the bank reconciliation, it shows in the timing items: deposits in transit dated on the last day of the year, and checks written in the last week. Each must be genuinely dated, released or received before year-end.

Three cutoff tests are worth doing on the final reconciliation:

1. **Deposits in transit.** Trace each one to the first statement of the new year. It should clear within a few business days. A large deposit recorded on 31 December that clears on 12 January was probably received in January. Its date should move.
2. **Checks written at year-end.** Confirm that checks dated in the last days of the year were actually mailed or handed over. A check written and held in a drawer until January is not a December payment, however it is dated.
3. **Transfers between accounts.** A transfer recorded in one account in December and in the other in January can count the same cash twice in the combined balance. Pair each year-end transfer and see which statement carries each leg.

The rules for what counts as outstanding or in transit are the same as any month, set out in [outstanding checks and deposits in transit](/blog/outstanding-checks-and-deposits-in-transit). What year-end adds is evidence: the January statement, which proves each timing item cleared. Auditors call that the cutoff statement, and [how cutoff bank statements test the outstanding items](/blog/audit-procedures-for-bank-reconciliation#how-do-cutoff-bank-statements-test-the-outstanding-items) explains what they look for in it.

### Transfers that span year-end

Transfers between accounts at different banks around year-end deserve a specific look. A pattern of transfers that leave one bank on the last day and arrive at another after it, especially in round amounts, can be a sign of float being used to inflate cash. [How check kiting shows in bank statements](/blog/check-kiting) covers the interbank schedule test used to rule it out.

## Clearing old open items before the year end bank reconciliation

Old open items should be resolved before the year end bank reconciliation is signed, not carried into the new year by default. An outstanding check over six months old, or a deposit in transit that never cleared, is unlikely to be a timing item. It is a liability, an error or a missing receipt.

The schedule below is an example of the review, with made-up items.

| Item | Date | Amount | Age at year-end | Action before signing |
| --- | --- | ---: | --- | --- |
| Check 2871, supplier refund | 14 Feb | 310.00 | 10 months | Contact payee; void and reissue, or move to an unclaimed liability account |
| Check 3204, contractor | 2 Sept | 1,450.00 | 4 months | Confirm received; keep if payee confirms |
| Check 3399, utilities | 28 Dec | 512.40 | 3 days | Keep; trace to January statement |
| Deposit in transit, customer | 15 Nov | 2,000.00 | 6 weeks | Investigate; no matching credit means it is not in transit |
| Deposit in transit, card settlement | 31 Dec | 3,846.20 | 0 days | Keep; trace to January statement |

### What resolving an item means

Resolving an item does not mean deleting it. A stale check that the payee never cashed is still money owed. Void it in the ledger, which reinstates the liability, and either reissue the payment or hold the amount as an unclaimed liability. Uncashed checks can fall under state unclaimed property rules once a dormancy period passes; [when uncashed checks become unclaimed property](/blog/uncashed-checks-unclaimed-property#how-do-you-clear-an-escheated-check-off-the-bank-reconciliation) sets out the due diligence, the report and the entries.

A deposit in transit that never cleared needs a trace back to the receipt. Find the deposit slip, the cash receipts record and the person who prepared it. If the deposit was never made, the ledger is overstated, and that is a matter for the owner or the board, not a reconciling item.

## Entries to post before signing the year-end bank reconciliation

Every book-side item found during the year must be posted before the year end bank reconciliation is signed. That includes bank fees, interest earned, returned checks, corrections of recording errors, and the reversals of any stale checks voided during the review. Signing first and posting later leaves the annual cash figure wrong.

A pre-close checklist for the cash account:

- [ ] Bank fees for every month are in the ledger, not only the months someone noticed.
- [ ] Interest earned on every account, including savings and money market accounts, is recorded.
- [ ] Returned checks and their fees have entries, with the receivable reinstated.
- [ ] Recording errors found during the year, such as transposed digits, have correcting entries.
- [ ] Stale checks voided during the review have reversing entries dated in the year-end period.
- [ ] Transfers between accounts are recorded once, with both legs paired.
- [ ] The final adjusted book balance equals the general ledger cash balance, with no reconciling item left on the book side.

The last line is the test. On a finished year-end reconciliation, all book-side items have become entries, so only bank-side timing items remain. If book-side items are still listed, the ledger is not ready to close.

The order of entries also depends on how the books are kept. A business on the cash basis has fewer entries to post, because there are no receivables or payables to adjust, but the bank-side timing items remain. [Bank reconciliation in cash basis accounting](/blog/bank-reconciliation-in-cash-basis-accounting) explains the differences.

## What support do auditors request for a year end bank reconciliation?

Auditors and reviewers usually ask for the reconciliation itself, the December and January bank statements, the outstanding check and deposit lists with supporting documents, and evidence that someone independent reviewed it. For audited entities they also send a bank confirmation directly to the bank. Prepare the folder before they ask.

A year-end support folder, one per account:

1. The signed year-end reconciliation, with preparer and reviewer names and dates.
2. The December statement, complete, every page.
3. The January statement, or a transaction history covering the first weeks of the new year.
4. The outstanding check list, each check traced to the January statement or explained.
5. The deposits in transit list, each traced to its clearing date and to the deposit slip.
6. The journal entries posted from the reconciliation, with their support.
7. The general ledger cash detail for the account for the full year.
8. The schedule of old items reviewed, with the action taken on each.

Keep the folder after the audit. The [IRS guidance on how long to keep records](https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records) ties the retention period to the period of limitations for the return, which is three years in the general case and longer in several others. The reconciliation and its statements support the cash figure on that return.

Small organisations without an audit still benefit from the folder. A church treasurer, for example, often hands the year-end figures to a finance committee or an independent examiner. [Church bank reconciliation for treasurers](/blog/church-bank-reconciliation) covers what that committee report should include.

## When the year end bank reconciliation is not the last word

The year end bank reconciliation can change after it is signed, because the January statement can reveal items that belonged to December. A check that clears for a different amount, a deposit that never appears or a fee charged on 31 December but listed on the next statement each send you back to the year-end figure.

Treat the signed reconciliation as provisional until the January statement has been ticked against it. Then:

- **If every timing item cleared as listed,** note it on the year-end reconciliation and file the January statement with it.
- **If an item cleared for a different amount,** find out which figure was right. A ledger error needs a correcting entry dated in December, if the books are still open, or in the new year with a note if they have closed.
- **If an item never cleared,** treat it as an old open item and resolve it as described above.
- **If a December transaction appears for the first time,** such as a fee or an unrecorded payment, post it to December while the books are open.

Once the annual accounts are issued or the return filed, corrections usually go in the new year with a clear note, rather than reopening a closed year. Agree the approach with whoever signs the accounts.

PreciseBankFlow foots the December and January statements, matches their lines to the ledger and exports an exception report that can go straight into the year-end folder. You can [request early access](/get-started) ahead of the close.