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How to Balance a Checkbook

balancing a checkbook definition

The only way to discover the error is to go back to the last time your checkbook was balanced and work your way forward. Reconcile it against the information that’s listed in your check register. This simply means going through your statement and your checkbook register line by line and matching up transactions. You might think checkbooks are no longer necessary for everyday transactions using your checking account. It’s common for financial institutions to issue debit or ATM cards to their customers anytime a new account is opened. The checks in your checkbook work similarly to cash, at least on your side of the transaction.

balancing a checkbook definition

Those fees can easily eat into your balance, potentially putting you in the red — and in debt to the bank. The old-school method of checkbook balancing assumed that you would carry a paper check register with you everywhere you went, and that you would record your transactions by hand. It also assumed that your transactions consisted primarily of paper checks going into and out of your account. However, even though the paper-and-pencil aspect of checkbook balancing has mostly gone the way of the dodo, the process is still a necessary part of maintaining your checking account.

Key reminders for balancing a checkbook

These amenities make it very easy to check your banking information each day. This is one of the reasons it’s a good idea to balance your checkbook more often than once a month, especially if you are newly adopting this financial task. You will have fewer transactions to comb through if you balance once a week or once every two weeks. Transactions that are listed in your checkbook register may not show up on your account statement if they’re still marked as pending with the bank.

balancing a checkbook definition

It can also be too easy to trust financial institutions, but banks can make mistakes too. Keep a record of all of your transactions in a checkbook register or even a simple notebook as a transaction log. Mobile banking apps and online access make it easy to see transactions quickly. Today we have almost instant access to our banking transactions, and debit card buys clear almost instantly. If you come across a transaction that is unauthorized or contains an error, contact your bank and find out how to get it corrected.

Review your transaction history and compare it to your bank statement

In this digital age of banking, writing checks and balancing a checkbook may seem like a thing of the past. Enter checks in as they occur or at the very least at the end of each day. Of course, receipts might come in handy later, so make sure to keep physical copies too.

Before being handed over in exchange for goods or services or any payment, a customer must fill out certain information on the check and then sign it. The information to be filled out includes the date, the name of the individual or business, and the amount of funds to be withdrawn. For instance, some people may choose not to record the pennies on the checks they write.

  1. Commit to balancing your checkbook on a weekly basis, which may be easier than trying to do it once a month or less often.
  2. This will leave you with the end balance on a given date so that a current balance can be calculated at any time.
  3. Additionally, because not all landlords are as organized or thorough as they could be when they cash your check, you have proof from your bank that it was cashed.
  4. Balancing your checkbook is a method of verifying that your records (your checkbook register) match the bank’s records, as shown on your monthly bank statement.

Starting with the first transaction you enter, subtract the amount from your available balance—in the case of a deposit, add it to the balance. It’s true that fintech can make managing your money easier but there are still very good reasons to make balancing your checkbook part of your financial routine. Do you faithfully balance your checkbook to the penny each month?

How to Balance a Checkbook?

Otherwise, you might forget about a transaction, which would result in an incorrect balance. Compare the amounts listed in your personal register or transaction log against the bank statement or transaction history. Note or place a checkmark on all the checks paid and deposits credited. Today, balancing your checkbook or reconciling your bank account is used as a way to match your bank statements with your record of transactions.

So what do you do if your numbers and the bank’s numbers don’t align? That’s when it’s time to backtrack through your records and the bank’s transaction history to see where the discrepancy is. Perhaps you forgot to record a transaction or you transposed a couple of numbers.

The second benefit to balancing a checkbook is fraud prevention. When you’re checking your account statements and transaction history regularly, it’s more likely that you’ll be able to spot any suspicious transactions. For example, a small deposit of a few cents or a $1 debit transaction could be evidence of a scammer testing the waters before launching a larger-scale attack on your account. Taking time to balance your checkbook could help you avoid financial headaches caused by fraud.

With the advent of the digital age, checkbooks have become obsolete. A person can have a checking account without ever actually having to write a check. On rare occasions a check is still required, such as paying rent, which requires writing a check out to your landlord. If you’re having trouble balancing your checkbook, it deferred revenue definition may be because you have transactions that are unaccounted for, either on your statement or in your checkbook register. Double-checking transactions or calling the bank could help you find an overlooked credit or debit. You can also review your register for mathematical errors that would result in an incorrect balance.

It is still in your best interest to review account activity once a month to help you keep track of what you’re spending and identify errors or incorrect charges. Be careful of unfamiliar charges, such as overdraft fees, on your statement that you hadn’t noted in your register. If you still can’t balance the figures, you can ask your bank for an extensive review of your transactions — but note that it may charge an account research fee of about $25 an hour. If your bank or credit union offers online banking, you can see an up-to-date list of your transactions online. Keep your receipts even if you go this route; you’ll need proof of your spending in case of a dispute over a transaction you see online.

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