How to Balance Your Checkbook
Knowing how to balance your checkbook is important. Saving you money and time in the future by preventing overspending is an important goal. Most people find themselves short of cash in their bank account on occasion.
They didn’t realize they didn’t record an Automated Teller Machine (ATM) withdrawal or a check they wrote. Balancing your checkbook is an essential part of owning a checking account and it gives you the ability to know what your current balance is. It will help you find any mistakes. The following information will provide you the tools to prevent checking account problems and let you know if you are reaching a critical point in your balance.
The Checking Account
You just got your checking account. You got a check register and checks. You know what the checks are for.
The check register is a tool for tracking deposits and withdrawals. Recording all ATM withdrawals, deposits and debit card transactions is very valuable. By using the available lines for date and amount in the register you can balance your checkbook easily.
Record all check numbers, amounts and the names of the company or person the checks were written to. Keep the register current by taking your running balance and subtracting withdrawals or adding deposits. Knowing the balance in your account will keep you from overspending and incurring extra fees and charges.
Month-End Bank Statement
At the end of each month, the bank sends you a statement listing the
checks received and the deposits and withdrawals within the month. Checks
written and not received are called outstanding checks. Deposits and
withdrawals NOT received by the bank are considered outstanding.
The balance you have on the statement are the transactions the bank recorded for the month. Other deposits, withdrawals, and checks outstanding are important and need to be calculated by hand to ensure a correct balance is shown in your register.
Tools to Balance Your Checking Account
- Month-end statement from bank
- Check register
- Calculator
- Pencil
- Highlighter
- Marker
Steps to Balancing Your Checking Account
Step 1
This will be the starting point of your reconciliation.
- Take the month-end statement and place it on a table or desk.
- Take the check register and put it beside the month-end statement.
- Locate the check reconciliation form in the statement and have it beside the other two articles mentioned above. It could be on the back of the page or on separate pages in the statement.
- At the top of the reconciliation, write the date, find the line for the closing balance. Write the closing balance from the statement on the closing balance line of the reconciliation page.
Step 2
- Place a check mark on all checks in the register that are on the statement.
- Mark all ATM withdrawals in the register listed on the statement.
- Check mark the register with all Debit Card transactions the statement lists.
- Place a mark on all deposits in the register that match deposits on the statement.
Step 3
The next steps will help bring the closing balance closer to the actual amount.
- Locate all deposits not marked, add them to the page and total them. These are the outstanding deposits. Add the Total Outstanding Deposits to the Closing Balance.
- Find the unmarked checks in the register and place their number and amount on the reconciliation page. These are outstanding and need to be recorded. Your statement may not have this exact wording but find an area on the reconciliation that will allow for a total of the outstanding checks.
- Using the calculator, add the amounts of the Outstanding Checks. Enter that amount on the line for the Total Outstanding Checks.
- Get any ATM withdrawals not marked and add them to the page and add those amounts. The page should now have total outstanding ATM withdrawals and total outstanding checks on two separate lines on the reconciliation page.
- Look for all Debit transactions not checked in the register and put them on the reconciliation page and total the amounts.
- Take the total amounts from Total Outstanding Checks, ATM withdrawals and Debit transactions, add them together and this will be the Total Outstanding Balance against the checking account.
- Subtract the Total Outstanding Balance from the Closing Balance.
Step 4
- Highlight fees, charges and dividends.
- Add a line to the register with today’s date and the total of all fees and bank charges.
- Subtract this line from the running balance on the check register.
- Find any dividend or bank generated payment to the account and total the amounts.
- Add a line to the check register indicating what is being added and add them to the running balance.
Checking Account Month-End Balance for the reconciliation page
- ADD Outstanding Deposits
SUBTRACT Outstanding Checks - SUBTRACT Outstanding ATM and Debits
= Current Balance from Reconciliation page
- Check register Balance
- ADD Dividends
- SUBTRACT Checks that were missed when written
- SUBTRACT ATM and Debit transactions not in register
- SUBTRACT Fees and Charges
= Current Register balance
Step 5
Compare the current balance to the check register balance. These numbers should be the same. A difference means you need to recheck your figures in case of a simple addition or subtraction error. Recheck all the figures making sure you have all outstanding checks, ATM and Debit transactions and all outstanding deposits. Make sure the check register amounts were correctly added and subtracted. When all this is done and you still have a difference, check all posted check amounts against the amounts on the register verifying they are correct.
Errors
If an error is found in the amount paid on a check, ATM or debit transactions, contact your bank to get it resolved. If the error was in the check register, make a note on a new line explaining the problem and adjusting the register total so it balances with the bank reconciliation.
If you are having difficulty balancing the checking account after performing the above steps, contact your bank for specialized help in getting the problem resolved.