Balancing our checkbook can be a frustrating task, and just like credit card statements, timing plays a role that can have us scratching our heads and wondering why the numbers don’t add up (see the article “Credit Card Statements and Billing Cycles”). It’s an important task though and well worth the effort because if we don’t balance them, we run the risk of writing a check that won’t clear. Writing a check that without having the money on deposit to cover it, results in an over-drawn account along with charges from our bank for handling the check, the embarrassment of a check not clearing, and having to write and send another check. In many cases the business receiving the “bad” check will also tack on a fee. This problem is so prevalent that banks have instituted Overdraft Protection and a host of other programs to help. It’s been said that “timing is everything”, and in the case of checkbook/checking account reconciliation, timing has a great deal to do with whether or not our book (the little ledger that the bank gave us) and our account balances match. So how do we handle this quickly and simply?
Banks provide a host of online information, and at any moment we can log on and see our account balances. Our checking account screen shows a list of transactions in reverse chronological order to help us stay up-to-date and to see the most recent transactions first. At the end of the monthly cycle (this may or may not start on the first of the month and may or may not end on the last day of the month), a statement is made available or mailed to us that shows transactions and balances for the monthly period. The Statement usually begins with a Summary section, followed by a list of transactions.
The Account Summary is a bird’s eye view of the account for the month. A sample is shown above. The Beginning Balance, and total amounts for Deposits, Checks, ATM and Debit Card Transactions, Fees, Other Subtractions, and the Ending Balance are listed. For most of us, we can’t balance our checkbooks using these amounts because we’ve had other transactions that haven’t yet been handled by the bank. The detailed list of transactions on the statement can help isolate these.
Since a blog doesn’t accommodate the length of a full scenario and explanation, I’ll point to two other sources. In Personal Finance Simply Understood, I walk step-by-step through a complete example with recommendations in Chapter 4. The book is a mere $10 at Jazer Solutions . There is also a article on our web site that takes a similar approach using a scenario and Jazer 100 software – Balancing a Checkbook.
Making timely and accurate entries in our checkbooks and balancing the ledger and the account regularly are critical to keeping things up to date and knowing exactly how much we have available in our checking accounts. The alternative could lead to an over-drawn situation and all of the fees and heartache that go along with it. We all make mistakes from time to time, and the sooner we catch them and correct them the better.
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