How to Properly Balance Your Bank Statement
Master financial accuracy. Learn to systematically balance your bank statement, gain control, and easily spot discrepancies.
Bank statement reconciliation, often called balancing your checkbook, is the process of comparing your personal financial records with the transactions listed on your bank statement. This process ensures accuracy, provides a clear picture of available funds, and helps identify errors or unauthorized transactions.
Understanding Your Records
Before beginning the reconciliation process, gather all necessary financial documents. This includes your most recent bank statement, detailing all transactions processed by your financial institution during a specific period. Key components on this statement typically include the beginning balance, all deposits, withdrawals, cleared checks, any service charges, and interest earned.
Alongside your bank statement, you will need your personal financial records, such as a checkbook register, a digital transaction log, or even a collection of receipts. These personal records should document every transaction you have made, including the date, payee, amount, and whether it was a deposit or withdrawal.
The Step-by-Step Reconciliation Process
The reconciliation process begins by comparing the deposits recorded in your personal financial records with those listed on your bank statement. As you find a matching deposit, mark it off on both your personal record and the bank statement.
Next, review all withdrawals and checks listed on your bank statement and compare them against your personal records. For each matching transaction, mark it off on both documents.
After marking off all matching items, identify any deposits you recorded in your personal records that do not yet appear on your bank statement. These are “deposits in transit” and represent funds the bank has not yet processed. These amounts will need to be added to your bank statement’s ending balance during the reconciliation.
Similarly, identify any checks or withdrawals from your personal records that have not yet cleared the bank and are not on your statement. These are “outstanding checks” or withdrawals, representing funds that have not yet cleared your bank account. These amounts will need to be subtracted from your bank statement’s ending balance.
Review your bank statement for any transactions that you may not have recorded in your personal records. Common examples include bank service charges or interest earned.
Adjust your personal record balance by subtracting any bank service charges or fees and adding any interest earned that appeared only on the bank statement. Then, adjust the ending balance from your bank statement by adding any deposits in transit and subtracting any outstanding checks or withdrawals. If both adjusted balances now match, your statement is reconciled.
Troubleshooting Unbalanced Statements
If, after completing the reconciliation steps, your bank statement and personal records do not balance, several common errors may be present. A frequent issue is a transposition error, where two digits in an amount are accidentally swapped.
Another common reason for an imbalance is a skipped transaction, where either a deposit or withdrawal was simply forgotten when recording in personal records. Mathematical errors during addition or subtraction within your personal register can also lead to discrepancies. Re-check all calculations.
If you suspect an error, begin by re-verifying each transaction, starting from the last reconciled balance. Focus on small sections of transactions at a time to more easily pinpoint the discrepancy. If, after thorough review, you still cannot identify the source of the imbalance, it is possible there might be a bank error. In such cases, contact your financial institution directly with your statement and personal records to investigate the issue.