How do you balance your checkbook? Your roommate, Megan, has never before had a checking account, but she finally opened one last month. Megan 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, Megan 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 Megan through the process. MEGAN: Thanks for helping me with this bank statement thing. So, where do we start? YOU: let's start with some preliminary questions, 11 ask and you answer, and we'll agree on some tundamentals about reconciling bank accounts So, why is it a good idea to reconcile your bank account or balance your checkbook? MEGANI 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 correctl 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? MEGANI That's an easy one. I remember reading that I should reconcile my bank account monthly 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 Megan's latest bank statement and her check register or ledger in hand, you can examine the documents Use the grey shder along the right-hand side of each of the following boxes to see Megan's bank statement and check register (account ledger). Fourth State Bank of San Francisco, CA Statement of Account Megan Smythe March 20XX 550 Angel Street San Francisco, CA Account 348596 Date Description Subtractions Additions Balance 3-01 Previous balance 1,045.50 3:01 500.00 1.545.50 Deposit Check 500 3-03 750.00 795.50 3-04 375.00 420.50 Check 501 ATM withdrawal 3-05 25.00 395.50 3-05 125.00 Deposit ATM withdrawal 520.50 485.35 3-11 35.15 3-15 500.00 985.35 Deposit Check 502 3-18 225.00 3.21 ATM withdrawal 47.65 760.35 712.70 887.70 3-22 175.00 3-24 Deposit Check 503 ATM withdrawal 75.00 50.00 812.70 762.70 3.26 Using the documentation from the bank and from Megan'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 Megan Smythe's Bank Reconciliation for March 29 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 Balance $1,545.50 795.50 420.50 395.50 520.50 485.35 985.35 Megan's Account Ledger Date Transaction Description Deposit Withdrawals Mar 01 Deposit - Payroll $500.00 Mar-03 Check 500 - Rent $750.00 Mar-04 Check 501 - Car payment 375.00 Mar-05 ATM withdrawal 87501 25.00 Mar-05 Deposit - Birthday gift 125.00 Mar-11 ATM withdrawal 89502 35.15 Mar-15 Deposit - Payroll 500.00 Mar-18 Check 502 Groceries 225.00 Mar-21 ATM withdrawal 93503 47.65 Mar-22 Deposit - Stipend 175.00 Mar 24 Check 503 - Bookstore 75.00 Mar-26 ATM withdrawal 94504 50.00 Mar 27 Check 504 - Dry cleaning 60.00 Mar-27 ATM withdrawal 97505 100.75 Mar 27 Check 505 - Car insurance 150.00 Mar 28 Deposit - Belated birthday gift 375.00 Mar 29 ATM withdrawal 99506 37.50 760.35 712.70 887.70 812.70 762.70 702.70 601.95 451.95 826.95 789.45
