How To Balance A Checkbook

You note that a check for $1,000 that you deposited during the month was returned as the issuer didn’t have enough money in their account to cover the check amount. So what happens when you find a difference between your records and the bank statement or other record you’re reconciling against? Ideally, you should reconcile your bank account each time you receive a statement from your bank. This is often done at the end of every month, weekly and even at the end of each day by businesses that have a large number of transactions. Match the deposits in the business records with those in the bank statement. For example, a company maintains a record of all the receipts for purchases made to make sure that the money incurred is going to the right avenues.

Any credit cards, PayPal accounts, or other accounts with business transactions should be reconciled. In general, reconciling bank statements can help you identify any unusual transactions that might be caused by fraud or accounting errors. Notice that the bank reconciliation form above still does not balance, even after including the outstanding checks. This means the bank has made an adjustment to your account that has not been recorded in your G/L. Once you establish a money market account, your bank will send you a register. This small book will enable you to keep track of your account’s balance.

Using this simple process each month will help you uncover any differences between your records and what shows up on your bank statement. The transactions should be deducted from the bank statement how is petty cash reported in financial statements balance. Also, transactions appearing in the bank statement but missing in the cash book should be noted. Some of the transactions affected may include ATM service charges, check printing fees.

At the bottom of your spreadsheet for February, add this note, tracking changes to your balance. They may not be fun, but when you do them on a regular basis you protect yourself from all kinds of pitfalls, like overdrawing money and becoming a victim of fraud. If you’re auditing your account, confirming the overdraft amount can be done by looking at the interest charged on overdrafts in the account. We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team. Maybe you don’t have a utility expense in July because you never received a bill.

Step 8. Summarize Reconciling Items

The benefit of a program like this is that it often will nudge you to complete your necessary tasks, and it will walk you through the process of balancing your records. You can create your own transaction register on an open-source spreadsheet platform, such as Google Sheets. This will mean you can access it from your phone, allowing you to make note of your transactions while you’re out and about.

👉 Today, we’ll examine why reconciling is important, what makes it difficult, and outline a secure and efficient way to prepare a business for flawless reconciliation. The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters. I wanted to see how everything is going about the reconciliation concern you had the other day. To help you understand reconciling items better, the following items include examples of different kinds of reconciling items. Reconciling an account is likely to mean proving or documenting that an account balance is correct.

  • This will mean you can access it from your phone, allowing you to make note of your transactions while you’re out and about.
  • The reconciliation process includes reconciling your bank account statements, but it also includes a review of other accounts and transactions that need to be completed regularly.
  • It may be that only old-school account holders still record and reconcile paper checkbooks by hand.
  • The bank transactions are imported automatically allowing you to match and categorize a large number of transactions at the click of a button.

Reconciliation between the bank statement and the general ledger allows both statements to complement each other. Errors and omissions in the books are easily detected and rectified. In the real world, the chance to reconcile accounts flawlessly is pretty small. However, when you know what may cause them, you might try to prevent their occurrence. Here are the most common things that cause account reconciliation differences.

Double checks

The amount of a rejected check should be added to the bank’s ending cash balance. After adjusting the balances as per the bank and as per the books, the adjusted amounts should be the same. If they are still not equal, you will have to repeat the process of reconciliation again. The business needs to identify the reasons for the discrepancy and reconcile the differences. This is done to confirm every item is accounted for and the ending balances match.

First and foremost, it can help determine whether there has been a potential error in the accounting process or inside the general ledger. Here’s an overview of how to do accounts reconciliation to ensure your company’s financial positions stay accurate. Designed to keep your bank and your G/L in balance, the bank reconciliation process also helps you correct possible errors, account for uncashed checks, and even locate missing deposits. The reconciliation process includes reconciling your bank account statements, but it also includes a review of other accounts and transactions that need to be completed regularly.

To stay on top of accounts receivable

If you match up these two reports, you should see zero difference between the two documents — it means they have the same value on a specific date. Reconciling the accounts is a particularly important activity for businesses and individuals because it is an opportunity to check for fraudulent activity and to prevent financial statement errors. Reconciliation is typically done at regular intervals, such as monthly or quarterly, as part of normal accounting procedures. If you’re interested in automating the bank reconciliation process, be sure to check out some accounting software options.


Doing this every month will ensure that you’re aware of any potential issues as soon as possible and that they can be resolved quickly and easily. If, on the other hand, your account doesn’t match the ledger, it’s likely that you have some type of error. That’s why producing accurate financial statements and maintaining well-run income statements and journal entries become unreasonably expensive. One could expect that accounts reconciliation will soon cease to be an issue, but there are certain challenges that arise with the growth of revenue. For instance, e-commerce businesses may struggle with accounting processes due to a large number of the sales channels they use. Next, a professional studies the acquired information and takes appropriate corrective actions to eliminate any discrepancies in both the general ledger and bank statement.

How to Balance a Checkbook

Similarly, if there are deposits appearing in the bank statement but are not in the cash book, add the entries to the cash book balance. This will ensure your unreconciled bank statements don’t pile up into an intimidating, time-consuming task. When you do a bank reconciliation, you first find the bank transactions that are responsible for your books and your bank account being out of sync. Your checking account balance is typically reported on a monthly basis and is listed on your bank statement. You might also have a variety of other statements related to your checking account that you need to reconcile on a quarterly or annual basis. Getting accurate records is one of the most important steps that affects your future reconciliations.

To reconcile bank statements you match the transaction on the bank statements to the transaction in your accounting records. While performing a bank reconciliation, you note that your general ledger balance is $6,000 while the bank’s monthly statement shows a balance of $5,990. You prepare a bank reconciliation statement by comparing the account balance recorded in your general ledger to the amount shown on the bank statement.