6. Checking account reconciliation Study Tools How do you balance your checkbook ns ess Tips ess Tips YOU ou Really Your roommate, Tim, has never before had a checking account, but he finally opened one last month. Tim 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 he doesn't know what to do next, Tim asks for your help in reconciling, or balancing, his checkbook. Being both a good friend and a student of personal finance, you've agreed to walk Tim through the process. TIM: 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? TIM: 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 venfied with the bank? TIM: That's an easy one. I remember reading that I should reconcile my bank account and withdrawal transactions online every cosiple of days but I should verify my ongoing deposit A-Z Tools ally Assignment: Chapter 04 Managing Your Cash and Savings 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 Tim's latest bank statement and his 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 Tim's bank statement and check register (account ledger). Fourth State Bank of San Francisco, CA Statement of Account Tim Smythe March 20XX 550 Angel Street San Francisco, CA Account 348596 Date Description Subtractions Additions Balance 3-01 3-01 Previous balance Deposit 1,045.50 500.00 1,545.50 3-03 Check 500 750.00 795.50 Mar-241 Check 503-Bookstore 75.00 812.70 Mar-26 ATM withdrawal 94504 50,00 762.70 Now, with Tim's latest bank statement and his 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 Tim's bank statement and check register (account ledger). 3-04 Check 501 375.00 420.50 3-05 ATM withdrawal 25.00 395.50 3-05 Deposit 125.00 520.50 3-11 ATM withdrawal 35.15 485.35 3-15 Deposit 500.00 985.35 3-18 Check 502 225.00 760.35 3-21 ATM withdrawal 47.65 712.70 3-22 Deposit 175.00 887.70 3-24 Check 503 75.00 812.70 Mar-24 Check 503 Bookstore 75.00 812.70 Mar-26 ATM withdrawal 94504 50.00 762.70 Mar-27 Check 504 Dry cleaning 60.00 702.70 Assignment: Chapter 04 Managing Your Cash and Savings 3-11 ATM withdrawal 35.15 485.35 Study Tools 3-15 Deposit 500.00 985.35 3-18 Check 502 225.00 760.35 A-Z ons 3-21 ATM withdrawal 47.65 712.70 3-22 Deposit 175.00 887.70 cess Tips 3-24 Check 503 75.00 812.70 ess Tips 3-26 ATM withdrawal 50.00 762.70 YOU Tim's Account Ledger Date You Really Transaction Description Deposit Withdrawals Balance Mar-01 Deposit Payroll $500.001 $1.545.50 Mar-031 Check 500- Rent $750.00 295.50 Mar-04 Check 501- Car payment 375.00 420.50 Mar-05 ATM withdrawal 87501 25.00 395.50 ack Mar-05 Deposit Birthday gift 125.00 520.50 O Mar-11 ATM withdrawal 89502 35.15 485.35 Mar-15 Deposit Payroll 500.00 985.35 dy Tools Mar-18 Check 502-Groceries 225.00 760.35 A-Z Mar-21 ATM withdrawal 93503 47.65 712.70 Mar-22 Deposit Stipend 175.00 887.70 Tips Mar-24 Check 503-Bookstore 75.00 812.70 Ips Mar-26 ATM withdrawal 94504 50.00 762.70 Mar-27 Check 504 Dry cleaning 60.00 702.70 J Mar-27 ATM withdrawal 97505 100.75 601.95 Mar-27 Mar-28 Check 505 - Car insurance 150.00 451.95 Deposit Belated birthday gift 375.00 826.95 Really Using the documentation from the bank and from Tim's check register, construct the bank reconciliation statement for March 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. Tim Smythe's Bank Reconciliation for March 29 Ending balance per bank statement, March 26 Add: Deposit in transit Deduct Outstanding checks and ATM transactions anique Home SAGE Assignment: Chapter 04 Managing Your Cash and Savings ATM withdrawal 10 Mar-2 100.75 601.95 urses Mar27 Check Car insurance 150.00 451.95 alog and Study Tools Mar Deposit Belsbed birthday g 375.00 Mar-29 ATM withdrawal 99506 37.50 826.95 789.45 mtal Options lege Success Tips eer Success Tips NDED FOR YOU ram (If You Really Using the documentation from the bank and from Tim's check register, construct the bank reconciliation statement for March 26 Hint: Any items that you enter into the bank reconciliation statement should be entered in the order in which they appeared on the accounted and bank statement Tim Smythe's Bank Reconciliation for March 29 Feedback Ending balance per bank statement, March 26 Add: Deposit in transit Deduct: Outstanding checks and ATM transactions Check number ATM number Check number ATM number Total withdrawals Adjusted bank balance Q Search this course A-Z Assignment: Chi Tools Using the documentation from the bank and from Tim's check register, construct the bank reconciliation statement for March 26. Hint: Any items that you enter into the bank reconcilation statement should be entered in the order in which they appeared on the account ledger and bank statement. Tim Smythe's Bank Reconciliation for March 29 eally Ending balance per bank statement, March 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, March 29 Grade It Now Save & Continue Continue without saving A-Z