Balancing your checkbook each month is essential to managing your money. It helps you to make sure that your records and the bank's records agree with each other. It allows you to correct any mistakes you or your bank have made over the month.
You can do this yourself with your written checkbook register. This register should record every transaction that you have completed during the month. Some people use duplicate copy checks that provide a carbon copy of any check they write and allow for easy record keeping.
If you are using money management software, you can do this using your computer program. Here is a step-by-step guide on how to balance your checkbook.
Begin with Your Checking Account Statement
First, you should look at your checking account statement. Your bank will likely list the deposits at the beginning. Next, they will list checks. Finally, they will list debit transactions and automatic drafts. You should note your beginning balance and your ending balance. You should also note any interest earned and any monthly service fees and add those to your register. (If you are balancing using a computer program the program will guide you through this step.)
Check Off Items in Your Register Listed on your Statement
Second, you will need to go through your check register and mark each item off that is listed on your statement. This means that the items have cleared.
In your register book, you will find a column with a c in it. That is where you will put your checkmark. Additionally, you may want to check each item on your statement off as you check it off in your ledger. This makes it easier when you are looking to solve a problem. (If you are using a computer program click in the column that says cleared.)
Find Items on Your Statement That You Forgot to Record
Third, you will want to check to find any items that are on your statement, but not listed in your register. Such items may include ATM withdrawals, debit card use, and unlisted checks you wrote but did not list.
If you recognize the transaction, but you cannot find it in your register, you should likely add it. If you do not recognize the transaction, you should report the unauthorized transaction to the bank. A customer service agent can help you resolve any discrepancies with your bank as soon as you find them.
If a deposit shows up that you do not recognize, you should speak with someone at your bank. It may be tempting to keep the money, but the bank will realize its mistake and remove the money from your account. You will be responsible for repaying any amount you have already spent. (This step is the same if you're using a computer.)
List Debits That Were Not Reconciled
Fourth, you need to list all of the unreconciled debits (checks, debit card transactions and automatic drafts) in one column. These will be the items without a checkmark next to them.
Add the column together and write down the total of your outstanding debits. Your bank may have a worksheet on the back of the first page outlining this process. (If you are using a computer program it will complete steps four, five and six for you.)
List Credits That Were Not Reconciled
Fifth, in another column you will list all the unreconciled credits (deposits) to your account. You will need to add this column together as well.
Add Your Statement Balance to the List of Credits and Subtract the Debits
Sixth, you will need to take your ending balance from your statement and add the total of your outstanding credits to it. Then you will need to subtract the total of your outstanding debits from that number. The number that you end up with should match the amount you have listed in your check register as your current balance.
Find Discrepancies in Your Account
Seventh, if the numbers do not match, you need to determine why. If it is off by a large amount you may want to see if you transposed any numbers. If it is off by a ten, or a hundred, you may have forgotten to carry or borrow in your addition. You can double-check your math with a calculator.
You may also want to check to see if you missed checking off a transaction. (If you are using a computer program you can focus less on the math and more on a mistake in recording a transaction.)
Correct Any Errors
Eighth, correct any mistakes that you find. If you can not find the error, then you will need to change your balance to make it match what the bank has. Most banks are willing to sit down with you and help you do this for the first time. The account representatives are available for this reason. Some may charge a fee, but most will do it for free the first time.
To get the best service you will need to go to the bank when it is usually slow, so avoid late afternoons, first thing in the morning. Do not go on a Monday or a Friday to receive this kind of help.