Personal Finance

How To Balance A Checkbook

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 7 minute read

With the widespread availability of smartphones, checking one’s bank account balance is as simple as opening a mobile banking app or visiting the bank’s online banking website.

In spite of its usefulness, the balance displayed in a banking app is not always reliable. In the case of a check, the transaction may take some time to clear.

It is important to balance your checkbook, also known as a check register, to avoid being charged an overdraft fee due to forgetting how much money you have in your account. 

To do this, you must keep a detailed paper trail of all of your financial dealings, be they made with a debit card, a check, an automatic payment, or a deposit.

How to Make a Checkbook Balance

It’s easy to dismiss checking your bank balance in this age of digital banking apps, but there are really two good reasons to do so.

Checkbook balancing has two primary purposes. First, it informs you of your current cash position by revealing any checks that have not yet been paid or deposited.

Second, you’ll be better able to identify suspicious discrepancies. When you follow these procedures, you can be assured that your checkbook balance is always accurate and that no transactions will go unnoticed. Check clearing activity may also be monitored using this tool.

Step 1: Take a look at your bank statement

Bank statements are still sometimes mailed out by some institutions, but the majority of customers now receive their statements exclusively online. 

Log in to your online banking account and print off your most recent statement if you no longer receive paper statements.

Step 2: Introducing Earned Interest

When a monthly statement is closed, the bank will deposit interest earnings into your interest-bearing checking account if your balance is positive.

Payment of interest is typically one of the final occurrences on the statement. Put the sum down in your checkbook register just like you would for any other purchase.

Step 3: Subtract any bank fees, then increase reimbursements.

Check your bank statement for any service costs, such as those for check writing, using an ATM outside of your bank’s network, or any other service, and jot them down in your checkbook register. 

If your bank reimburses your ATM costs, you may locate the amount that was refunded on your monthly statement.

Step 4: Check Each Deposit

Check that your monthly statement agrees with your checkbook register. Mark any entries in your check register and bank statement that correspond.

If you make a deposit that doesn’t show on your statement but does in your check register, be sure to record the dates, descriptions, and amounts. Current deposits are referred to as outstanding.

On the back of your statement, there may be a section for you to record any deposits that are still pending. Put them in your memory for later.

Step 5: Check Each Check Payment

Check your monthly statement against your check register to ensure accuracy. Mark your checkbook register and bank statement where appropriate to indicate any corresponding check payments.

Step 6: Examine any unpaid balances from earlier months.

Find any old statements that have transactions like cheques or deposits that haven’t been cashed yet. Please review your statement to verify that the aforementioned goods were paid in full.

You can cross them off the list of pending transactions and the current statement if they cleared during this period.

It’s best to check up with the business you paid if a transaction is still showing up on your bill after 60 days. Call your bank immediately to halt payment on the cheque if the recipient has reported that they have not received it.

Step 7: Check Every Other Transaction

Check your monthly statement against all the other transactions you recorded in your check register. Debit card purchases, automated payments, ACHs, and ATM withdrawals are all examples of these types of transactions.

Check your bank statement’s debit entry against the amount you recorded in your checkbook. Make sure that all of the entries in your check register and bank statement line up with one another.

Take note of any differences and do what needs to be done to fix them. For instance, if you see a debit card transaction that costs more than usual, you should get in touch with the relevant institution to find out why. Make a trip to the bank if you can’t figure it out on your own.

Step 8: List all pending balances

Don’t forget to record the dates, descriptions, and amounts of any checks, debits, or ACH payments that aren’t reflected on your account in your check register.

Do not complete these check transactions just yet. In the same way that you may keep track of overdue payments on the back of your monthly bill, you can keep track of overdue debts.

Step 9: Your checkbook should be balanced.

Take a look at the final balance on this month’s statement. To calculate your net worth as of the conclusion of the billing cycle, add up all deposits still pending and deduct all pending debits.

The sum you get should balance your checkbook. If there is a disparity between the two totals, you need to discover where the problem rests.

A Review of Transaction Entry in Your Check Register

You can’t keep track of your checkbook without recording all of your transactions in a check register. Keeping a check register helps in checking for discrepancies and balancing the account.

The stages to a well-organized checkbook are as follows.

  1. Enter your starting balance.
  2. Enter the date.
  3. Enter the check number if applicable.
  4. Enter the transaction description.
  5. Enter the payment or deposit amount.
  6. Calculate your updated balance.
  7. Clear the transaction.

Read on for further information about how to write checks and record payments in a checkbook.

How to Find a Mistake in an Unbalanced Check Register

Sometimes it seems like nothing ever works out right. This can happen due to a math mistake, a transposed number, an unrecorded transaction, or possibly a misapplied debit or credit.

If you want to know where the problem is and how to fix it, here’s how.

Step 1: Check Again Your Pending Transactions

Check the exactness of all of your outstanding bills by going through each one one by one. Possible scenarios include either failing to notice a cleared transaction or incorrectly supposing that you witnessed a cleared transaction when in fact you did not.

Make the appropriate corrections and balance your checkbook if you discover an inconsistency.

Step 2: Divide the Distinction

If Step 1 does not resolve the issue, you can use basic division to locate potential error areas.

Find the discrepancy between your checkbook and statement balances by deducting the smaller figure from the bigger one. Multiply the result by 9. You have a transposed number if the final tally has no decimal places. 

This indicates that you switched the order of your numbers by accident. One of the errors you made was transcribing $154 as $145, for instance.

To locate the incorrect digit, cross-reference your check register with all of your canceled checks and receipts. To correct the mistake and balanced the checkbook, just change the transposed number.

In the absence of transposition, the difference should be divided by 2. Look up the outcome in your checkbook register if it’s a dollar and cents figure like 2.95 (and not 2.956). 

You probably meant to add it and ended up subtracting it, or vice versa. Once you locate this figure and confirm the mathematical error, you may adjust for it and balance your checkbook accordingly.

Step 3: Speak to Your Bank

Speak with your bank for more help reconciling your checkbook if you’re still having trouble determining the cause of the discrepancy. If your checkbook isn’t balancing, it might be because of an unnoticed hold or an unfinished transaction.

Alternatives to Paper and Pens

In this day of computers, do you find it unnecessary to write everything down and do mathematical operations by hand? 

Thankfully, there are alternatives to manually balancing your checkbook in the form of a variety of applications and software that connect to your bank account and assist you in keeping track of your balance.

The Daily Check-Ins

By clearing transactions from your checkbook register each day, you may eliminate the hassle of balancing your checking account at the end of the month.

Schedule your daily online banking session during a time when you know you will have some spare time. Check the status of the transactions listed in your checkbook register against the balance in your account. Don’t bother checking your checkbook register for erroneous or unfinished transactions.

Do this every day until you see results. Each day, double-check that any outstanding transactions have cleared and mark them as paid. After 60 days, you should follow up with the person or business you paid to resolve any unresolved issues with the transaction. If they can’t help you, try your bank.

Financial software and applications

Checkbook balancing applications and other financial tools are also readily available. To top it all off, they may also assist you with your financial planning.

You can keep track of your spending and savings with the help of apps like Mint, Personal Capital, and You Need A Budget (YNAB). In many cases, you’ll need to log in and assign tags to these purchases, making this the ideal opportunity to additionally mark them as complete in your checkbook.

Bottom Line

Even though many processes can now be automated, human intervention is still required to guarantee accuracy. There is no clearer illustration of this than trying to keep a checkbook in balance. 

Our financial dealings may be followed through our online banking applications and websites, however, some of our transactions may take a while to report.

The overdraft charge you incur might be rather high if you miss this transaction and don’t balance your checkbook at the end of the month. Daily balance checks through your bank or personal financial app may be preferable if seeing a single, high sum at the end of the month causes anxiety.

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