Reconciling a bank statement can seem intimidating, but it need not be. There's a method to the madness. According to an article in the financial planning section of About.com entitled " Balancing Your Checkbook - How Important Is It?," reconciling bank statements with checkbooks is necessary for the following four reasons:
- to verify bank records match personal records
- to make sure there are no math errors in the checkbook
- to avoid bouncing checks and overdraft fees
- to catch problems quickly
Learning how to balance a checkbook is one tool for navigating the sometimes stormy sea of personal finance.
Recording Financial Data
Along with a workable budget, controlling personal finances requires accurate bookkeeping. Keep up with every transaction. Note how much each check was written for, to whom, and when it was written. Subtract that check's amount from the previous balance and post the new balance. Transposition errors are easy, so double-check the math. Keep all monthly receipts in a file with the name of the month on it in case of discrepancies later.
Balance the Checkbook
Most folks receive their statement from the bank at month's end. The statement will include either the actual canceled checks, or a printout showing icons of the checks. Sort the real checks numerically. The sheet graphically illustrating the checks won't need sorting.
Compare the canceled checks with the statement. Confirm that amount on the check matches the bank statement. Then, with a pen, place a mark next to the cleared ones.
Check off any service charges, fees, or ATM withdrawals, and make sure they're entered into the checkbook correctly.
Next, note that the deposits shown in the checkbook match the ones shown in the register.
Use the handy form on the back of the bank statement to complete the reconciliation. Find the statement balance (on the front side of the statement, usually at the top). Enter it in the appropriate spot on the form. List the deposits from the checkbook that weren't shown on the statement (these haven't cleared yet).
Now it's time for a little math. Add the statement balance and the un-cleared deposits. This is the adjusted balance.
List outstanding checks (those that weren't included in the statement). Add them up, and subtract this sum from the adjusted balance. Don't forget to add in any interest and subtract out any bank fees. The grand total should agree with the checkbook balance.
Handling Checkbook and Bank Statement Discrepancies
What if the final balance is off? It's most likely a math error. Go back through the past month and look at the checkbook numbers. Review addition, and check for older checks from earlier months that haven't cleared yet. Were earlier bank charges and interest payments posted? Transposition errors are common, but a careful search will usually turn them up.
Bank Statement Reconciliation Accountability
Don't put off reconciliation. A missed month will make balancing future statements that much more difficult - and time consuming. Worse case scenario - not knowing how much money is in the account, then running out of money. And bouncing checks.
Bank account reconciliation need not be a chore. With a little preparation, some forethought, and a meticulous mind set, balancing a checkbook can be quick and easy. The result? Financial peace of mind.
Sources:
How to Start a Home-Based Landscaping Business, by Owen E. Dell; 2010 Globe Pequot Press
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