Balancing Your Checkbook:
A Task Worth Doing
It can be a pain, but balancing your checkbook is necessary to effectively manage your money. Comparing your check register to the bank statement can be time-consuming. However, it’s the only way to know that your records match the bank’s records.
Banks make mistakes, too
Banks do make errors from time to time, and you generally only have 60 days to notify the bank about their mistake.
Steps in preparing a bank reconciliation
Most people today receive their banking information electronically via bank websites. It’s easiest to access your banking information daily this way. If you do, you can reconcile your records to the bank’s records as often as you wish (every few days or so). If you still receive a paper bank statement once a month, it’s easiest to balance your checkbook right after you receive the bank statement in the mail. Follow these steps to prepare the reconciliation:
Balance per bank:
1. Write down the ending balance on the bank statement
2. Add deposits in transit (deposits you have recorded in your checkbook, usually toward the end of the month, which had not yet cleared the bank as of the bank statement date.
3. Deduct outstanding checks (checks you have recorded in your checkbook, usually toward the end of the month) which had not yet cleared the bank as of the bank statement date.
4. Add or subtract any bank mistakes (rare, but it happens).
5. Compute a subtotal and call it adjusted balance per bank.
Balance per your checkbook:
6. Write down the ending balance in your checkbook
7. Add any interest revenue that the bank has credited to your account that you have not yet recorded in your checkbook.
8. Add any electronic funds transfers (EFTs) that the bank may have credited to your account that you have not yet recorded in your checkbook.
9. Deduct any service charges that the bank has debited to your account that you have not yet recorded in your checkbook. These include the cost of printed checks or other fees the bank may have charged you. Also deduct any nonsufficient funds (NSF) checks given to you by others that have been turned down by your bank.
10. Compute a subtotal and call it adjusted balance per books.
Compare the subtotals from step 5 and step 10. The two subtotals should be equal.
Use a reconciliation form
If you receive a paper bank statement, you will usually find a reconciliation form printed on the back of your bank statement. You can use that form to write down any outstanding checks, debit card purchases, and ATM withdrawals and outstanding deposits. Compare these to the bank statement, and be sure the totals in your register match those on your statement. If you receive an electronic statement, here is a link to an electronic spreadsheet for preparing a bank reconciliation in EXCEL: http://www.samplewords.com/bank-reconciliation-spreadsheet/.
Reviewed and edited by C. William Thomas, J.E. Bush Professor of Accounting in the Hankamer School of Business at Baylor University.