June 14, 2008

Checking Basics 101 – Balancing Your Checkbook

Posted in Finances tagged at 12:33 pm by otherdeb


I think that the easiest way to do this is to take you through it step by step. Since many folks get their statements electronically these days, I will use the form that BCSalliance.com provides, which you can print out here

The first thing you should do when you get your new statement is take your checkbook, and make sure every item on the statement gets a tick on your check register (there is usually a column marked with a check mark for doing this).

Next, go to the form. (For this section, I will use a recent statement reconciliation of mine as a guide.)

BCSalliance.com Reconciling Checking Account

The first thing is to enter your checkbook balance on line (a). Next add any interest on line (b) and subtract any fees on line (c). The result of this will be line (d), your new checkbook balance.

Checkbook

Checkbook balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (a) $116.98

Add Earned interest income . . . . . . . . . . . . . . . . . . . . . . . .(b) -0-

Subtract Service Charges / Fees . . . . . . . . . . . . . . . . . . . . .(c) -0-

New Checkbook Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . (d) $116.98

Next, go to your statement. Put the balance from your statement on line (e). List the outstanding checks and ATM withdrawals [and fees] from your checkbook [these are the items that you have not checked off], and total them. This total goes on line (f). Subtract Line (f) from line (e) for your subtotal. NOTE: If this subtotal is negative, DO NOT PANIC. It doesn’t necessarily mean you have screwed up.

Bank Statement

Statement balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(e) $500.70

List outstanding checks . . . . . . . . . . . . . . . . . . . . . .. . . . . .(f) $1941.00

Check No. Amount
139 $1150.00
000037 $100.00
5/5 $100.00
132 $575.00
131 $15.00

Subtotal [subtract (f) from (e)] . . . . . . . . . . . . . . . . . . . . . (g) ($1440.30)

Next, list the deposits [and any checks you have reversed] that have occurred since the date of the statement. Total them and place the total on line (h).

Total of unrecorded deposits . . . . . . . . . . . . . . . . . . . . . . . . (h) $1557.28

Date Amount
5/12 $482.28
5/12 $500.00
Void 132 $575.00

Add lines (g) and (h). If (g) was negative, subtract it from (h). This total should be the same as the balance in your checkbook.

Checkbook should show this balance . . . . . . . . . . . . . . . . . . .(i) $116.98

It’s just not that hard to do. I am a mathophobe, so I use a calculator to do my adding and subtracting. The first time or two, it might be a bit uncomfortable, but that happens with any new habit or skill we try to learn.

Finally, I have a couple of shout-outs and a small plea for help to make: First, as always, to my mother, who taught me the fine art of doing this by letting me help her do hers when I was a kid. Second to Marc S. Glasser, a superb researcher and copyeditor, who called me back (within 30 minutes) with a ton of resources when I called him in the middle of a workday re online reconciliation forms. Third, I am pretty new to HTML, so if anyone can tell me how to tweak the form so that it looks better, I would appreciate it very much.

Now that I’ve broken down the process, are you willing to try it yourself? I would love to hear your results, or any questions that arise.

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3 Comments »

  1. Marion said,

    Yes, I used to do it in a similar way to what you describe, but usually using a sheet of paper if necessary for any extra calculations.

    Now? I cheat. *g*

    I have a banking program on my Psion organiser which I use to keep a record of all my banking activity – withdrawals, payments by cheque or debit card, and credits. It will take direct debits on a regular basis, as these can be set up to activate automatically, and even do these as automatic credits – for instance, if you know what the interest rate on an account is, you can set that up and it will put it in automatically every month (it isn’t always exactly right, but it’s easy to spot and adjust when the statement arrives). Also, you can set up entries for things you do frequently but not necessarily for the same amount or on the same date – I have one called ‘shopping’, which is set up to be paid to Tesco by my Maestro debit card, but I can easily call it up and change it to (say) Sainsbury and Visa debit from the other account (I have two). Withdrawals of cash by debit card can be transferred to a ‘cash’ account (and then I use a cash book, my change purse, and a scrap of paper every week or month to make sure those balance!). Usefully, it also includes a ‘car’ module, which automatically calculates things when I put in an entry for ‘petrol’, and tells me how many miles to the gallon I’ve done, with a graph if I want to see it that way, and a breakdown of the average price per gallon and miles/time between fill-ups and so on.

    When the statements arrive, I go to the relevant account on the Psion, and tick off each item on the statement, and hit the spacebar while on that item onscreen, which marks it as ‘reconciled’. Then I can easily see if something hasn’t been ticked off (i.e. I forgot to enter it, and have to look out the receipt or cheque stub for it), or hasn’t been reconciled (so I need to keep it in mind if, for example, someone hasn’t paid in a cheque I wrote for them).

    Then, if the balances agree, I can archive off the ‘reconciled’ entries, and am ready to start again.

  2. otherdeb said,

    @Marion: Yep, I have one of those on my Palm Centro and I love it. But I still do a formal bank reconciliation every month, just to set my brain at reat.

    And, given the problems not doing so has created for my roommate, and that I’ve run into other folks who have said that they had never been able to do so, I figured it was a kind of important “basic” skill to review.

  3. […] Checking Basics 101 – Balancing Your Checkbook […]


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