Attempts: Keep the Highest: 12 6. Checking account reconciliation How do you balance your checkbook? Your roommate, Felix, has never before had a checking account, but he finally opened one last month. Felix 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, Felix 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 Felix through the process. FELIX: 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? FELIX: 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 reconciliation date 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? FELIX: That's an easy one. I remember reading that I should reconcile my bank account monthly, but I should verify my ongoing deposit and withdrawal transactions online every couple of days. 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 Felix's latest bank statement and his check register or ledger in hand, you can examine the documents. Fourth State Bank of San Francisco, CA Statement of Account Felix Smythe November 20xx 550 Angel Street San Francisco, CA Account 348596 Date Description Subtractions Additions Balance 11-01 Previous balance 1,145.75 11-01 Deposit 250.00 1,395.75 11-03 Check 900 550.00 845.75 11-04 Check 901 275.00 570.75 11-05 ATM withdrawal 25.00 545.75 11-05 Deposit 62.50 608.25 11-11 ATM withdrawal 35.15 573.10 11-15 Deposit 250.00 823.10 11-18 Check 902 165.00 658.10 11-21 ATM withdrawal 47.65 610.45 11-22 Deposit 87.50 697.95 11-24 Check 903 55.00 642.95 11-26 ATM withdrawal 50.00 592.95 Felix's Account Ledger Date Transaction Description Deposit withdrawals Balance Nov-01 Deposit - Payroll $250.00 $1,395.75 Nov-03 Check 900 - Rent $550.00 845.75 Nov-04 Check 901 - Car payment 275.00 570.75 Nov-05 ATM withdrawal 87501 25.00 545.75 Nov-05 Deposit - Birthday gift 62.50 608.25 Nov-11 ATM withdrawal 89502 35.15 573.10 Nov-15 Deposit - Payroll 250.00 823.10 Nov-18 Check 902 - Groceries 165.00 658.10 Nov-21 ATM withdrawal 93503 47.65 610.45 Nov-22 Deposit - Stipend 87.50 697.95 Nov-24 Check 903 - Bookstore 55.00 642.95 Nov-26 ATM withdrawal 94504 50.00 592.95 Nov-27 Check 904 - Dry cleaning 44.00 548.95 Nov-27 ATM withdrawal 97505 100.75 448.20 Nov-27 Check 905 - Car insurance 110.00 338.20 Nov-28 Deposit - Belated birthday gift 187.50 525.70 Nov-29 ATM withdrawal 99506 37.50 488.20 Using the documentation from the bank and from Felix's check register, construct the bank reconciliation statement for November 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 Felix Smythe's Bank Reconciliation for November 29 Ending balance per bank statement, November 26 Add: Deposit in transit Deduct: Outstanding checks and ATM transactions Check number ATM number Check number ATM number II NI HITTITE Total withdrawals Adjusted bank balance Balance per books, November 29
