How do you balance your checkbook? Your roommate, Rosa, has never before had a checking account, but she finally opened one last month. Rosa 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, Rosa 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 Rosa through the process. ROSA: 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? ROSA: 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? ROSA: That's an easy one. I remember reading that I should reconcile my bank account, and withdrawal transactions online every couple of days. but I should verify my ongoing deposit 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 Rosa's latest bank statement and her check register or ledger in hand, you can examine the documents. Fourth State Bank of San Francisco, CA Statement of Account Rosa Smythe 550 Angel Street March 20XX San Francisco, CA Account 348596 Date Description Subtractions Additions Balance 3-01 Previous balance 1,747.25 3-01 Deposit 250.00 1,997.25 3-03 Check 500 550.00 1,447.25 3-04 Check 501 275.00 1,172.25 3-05 ATM withdrawal 25.00 1,147.25 3-05 Deposit 62.50 1,209.75 3-11 ATM withdrawal 35.15 1,174.60 3-15 Deposit 250.00 1,424.60 3-18 Check 502 165.00 1,259.60 3-21 ATM withdrawal 47.65 1,211.95 3-22 Deposit 87.50 1,299.45 3-24 Check 503 55.00 1,244.45 3-26 ATM withdrawal 50.00 1,194.45 Rosa's Account Ledger Date Transaction Description Deposit Withdrawals Balance Mar-01 Deposit Payroll $250.00 $1,997.25 Mar-03 Check 500- Rent $550.00 1,447.25 Mar-04 Check 501 Car payment 275.00 1,172.25 Mar-05 ATM withdrawal 87501 25.00 1,147.25 Mar-05 Deposit Birthday gift Mar-11 ATM withdrawal 89502 62.50 1,209.75 35.15 1,174.60 Mar-15 Deposit Payroll 250.00 1,424.60 Mar-18 Check 502 - Groceries 165.00 1,259.60 Mar-21 ATM withdrawal 93503 47.65 1,211.95 Mar-22 Deposit Stipend 87.50 1,299.45 Mar-24 Check 503- Bookstore 55.00 1,244.45 Mar-26 ATM withdrawal 94504 50.00 1,194.45 Mar-27 Check 504 Dry cleaning 44.00 1,150.45 Mar-27 ATM withdrawal 97505 100.75 1,049.70 Mar-27 Check 505 Car insurance 110.00 939.70 Mar-28 Deposit - Belated birthday gift 187.50 1,127.20 Mar-29 ATM withdrawal 99506 37.50 1,089.70 Rosa Smythe's Bank Reconciliation for March 29 Using the documentation from the bank and from Rosa'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. 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 IL