6. Checking account reconciliation How do you balance your checkbook? Your roommate, Susan, has never before had a checking account, but she finally opened one last month. Susan is standing in the doorway of the kitchen with the check register in one hand and the recently arrived bank statement in the other. Admitting that she doesn't know what to do next, Susan asks for your help in reconciling, or balancing, her checkbook. Being both a good friend and a student of personal finance, you've agreed to walk Susan through the process. SUSAN: Thanks for helping me with this bank statement thing. So, where do we start? YOU: Let's start with some preliminary questions. I'll ask and you answer, and we'll agree on some fundamentals about reconciling bank accounts. So, why is it a good idea to reconcile your bank account or balance your checkbook? SUSAN: According to my personal finance book, reconciling my account will help me spot potential errors in the bank statement or my own records, and it will verify my account's actual balance as of the YOU: You're absolutely correct! Now, according to the experts, how frequently should a bank reconciliation be performed, and how frequently should ongoing or between-statement deposits and withdrawals be verified with the bank? Ch 04: Assignment - Managing Your Cash and Savings YOU: You're absolutely correct! Now, according to the experts, how frequently should a bank reconciliation be performed, and how frequently should ongoing or between-statement deposits and withdrawals be verified with the bank? SUSAN: That's an easy one. I remember reading that I should reconcile my bank account deposit and withdrawal transactions online every couple of days. , but I should verify my ongoing YOU: That's right! Now that you've got the fundamentals under control, let's go through the actual process of balancing the checkbook. Now, with Susan's latest bank statement and her check register or ledger in hand, you can examine the documents. Use the grey slider along the right-hand side of each of the following boxes to see Susan's bank statement and check register (account ledger). Susan Smyther 550 Angel Street San Francisco, CA Account 348596 Date Description Subtractions Additions Balance 9-01 Previous balance 1,246.00 9-01 Deposit 350.00 1,596.00 9-03 Check 900 650.00 946.00 9-04 Check 901 325.00 621.00 Susan Smythe 550 Angel Street September 20XX San Francisco, CA Account 348596 Date Description Subtractions Additions Balance 9-01 Previous balance 1,246.00 9-01 Deposit 350.00 1,596.00 9-03 Check 900 650.00 946.00 9-04 Check 901 325.00 621.00 9-05 ATM withdrawal 25.00 596.00 9-05 Deposit 87.50 683.50 9-11 ATM withdrawal 35.15 648.35 9-15 Deposit 350.00 998.35 9-18 Check 902 195.00 803.35 9-21 ATM withdrawal 47.65 755.70 9-22 Deposit 122.50 878.20 9-24 Check 903 65.00 813.20 9-26 ATM withdrawal 50.00 763.20 Susan's Account Ledger Date Transaction Description Deposit Withdrawals Balance Sep-01 Deposit - Payroll $350.00 $1,596.00 Sep-03 Check 900 Rent $650.00 946.00 Check 901 Car payment Sep-04 Sep-05 ATM withdrawal 87501 325.00 621.00 25.00 596.00 Sep-05 Deposit Birthday gift 87.50 683.50 Sep-11 ATM withdrawal 89502 35.15 648.35 Sep-15 Deposit - Payroll 350.00 998.35 Ch 04: Assignment - Managing Your Cash and Savings 32357 622143 Sep-05 ATM withdrawal 87501 25.00 596.00 Sep-05 Deposit - Birthday gift 87.50 683.50 Sep-11 Sep-15 ATM withdrawal 89502 35.15 648.35 Deposit - Payroll 350.00 998.35 Sep-18 Check 902 Groceries 195.00 803.35 Sep-21 ATM withdrawal 93503 47.65 755.70 Sep-22 Deposit - Stipend 122.50 878.20 Sep-24 Check 903 Bookstore 65.00 813.20 Sep-26 ATM withdrawal 94504 50.00 763.20 Sep-27 Check 904 - Dry cleaning 52.00 711.20 Sep-27 ATM withdrawal 97505 100.75 610.45 Sep-27 Check 905 Car insurance 130.00 480.45 Sep-28 Deposit - Belated birthday gift 262.50 742.95 Sep-29 ATM withdrawal 99506 37.50 705.45 Ch 04: Assignment - Managing Your Cash and Savings Using the documentation from the bank and from Susan's check register, construct the bank reconciliation statement for September 26. Hint: Any items that you enter into the bank reconciliation statement should be entered in the order in which they appeared on the account ledger and bank statement, Susan Smythe's Bank Reconciliation for September 29 Ending balance per bank statement, September 26 Add: Deposit in transit Deduct: Outstanding checks and ATM transactions Check number ATM number Check number ATM number Total withdrawals Adjusted bank balance Balance per books, September 29