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Balancing your Bank Statement

Updated on March 15, 2017
cherylone profile image

Budgets and bookkeeping have always come so easy to me. I had planned to be a CPA, but life kind of got in the way.

He would rather be napping than balancing his bank statement.

"Do I really have to do this?"
"Do I really have to do this?" | Source

The Dreaded Bank Statement

You get the bank statement in the mail. What are you supposed to do with it? What are all those 'fee' things? Did I really use my debit card that often? Why does it say I owe them money?

I know how confusing it is to balance your bank statement to your check register. I know that the math of the whole thing is, well, confusing. Yes, and it is time consuming. Yet, in order for you to find errors, both yours and the bank's, it is a necessary task. I have found several errors while balancing my bank statement, mostly mine, but some were the bank's error. One of the most memorable ones was the time I wrote a check for $250 to pay a bill and the bank took it at $2.50.

So relax, the bank statement may seem complicated, and I suppose to a certain extent it is complicated; but I will do my best to make it easy to understand and easy to complete. Don't worry if you are not a math wiz or if you can't tell a debit from a credit. I will explain it all for you. When you are done reading this Hub, you will be a wiz at balancing your bank statement.

What a Typical Bank Statement Might Look Like:

Source

FYI

Don't get panicky if you can't remember what each item is because the bank has conveniently labeled each part for you. They even put in the (-) and (+) signs for some areas. That way you can easily see what is there without having to go back to your notes.

What the Bank Statement Contains

I marked each section on the illustration above to help you follow along.

A} This is usually where the bank lists their name, or they might list it in the center of the page above their phone and address.

B} This is usually where the bank lists their phone and address and marks other identifying and/or important items like “Equal Housing Lender” or “Member FDIC-Federal Deposit Insurance Corporation”.

C} This is usually your name and address.

D} This is usually the page number and number of pages included (such as page 1 of 3), the dates (period) covered such as December 18, 2000 to January 15, 2001 and your account number(s). The bank uses fiscal accounting--meaning they run from the date of the month you opened your account until 30 days later.

E} This is a summary of your account giving a beginning balance, total deposits, total interest paid to you, total withdrawals you made, total service charges (fees) applied to your account and the ending balance of your account based on items that have cleared the bank. Check this section for an overall look at what the activity of your account has been since your last statement. Pay particular attention to the Service Charges section for charges of which you may not have been aware. These could be a charge for an ATM that wasn't in your banks network, or perhaps an overdraft fee.

You can hide from reconciling your bank statement, but that just means you will never know your true balance. This can cause a lot of overdrafts and fees.

Source

Don't Let The Bank Intimidate You

When you have a bank account, the bank holds onto your money for you and then pays out what you 'tell' them to pay out based on your activities. When you use your debit card, for instance, you are telling the bank to remove the amount from your account and pay it to the business where you used the card. You are in charge, not the bank. However, common sense tells us that we cannot ask the bank to pay out money we have not put into the account; that is where the overdraft fees come into play. So keep track of your money and there will be no added fees reducing your balance.

The 'F' Section Is Broken Down and Explained Below:

  • The first column is the Date which is actually the date the bank processed the transaction, not necessarily the date you made the transaction (or the date you wrote a check or used the ATM, etc.).
  • The second column is the Description of the Transaction which lists the company if it was an electronic transaction (marked as Activity POS…..), the fact a check (or more) was paid (no information other than check paid may be given), the fact that a deposit was made and whether it was direct deposit or not, fees and what type, interest charged or added, etc.
  • The third column is the amount of the transaction. A minus sign may appear if the amount is being deducted from your account. Just remember that checks and charges are deducted from your account and deposits are added to your account.
  • The Fourth column is the balance of your account once that transaction has been processed. The bank keeps a running total as each transaction is processed. The final amount is your account balance based on what the bank has processed. This is most likely not the balance you have in your register. Don't panic, you have to add or deduct items in your check register from the bank balance.
  • The reason you bank balance is different from your register balance is because you may have written checks, paid for something with your debit card, or made a deposit since the date the bank ended that statement. For instance: if you made a deposit on January 9th, and the bank statement ended on January 1st, then the deposit will not be on the statement, but will be in your register.

"Hi frogs, I see you finished balancing your bank statement before the rest of your friends.  You look yummy, uh, I mean that's yummy."
"Hi frogs, I see you finished balancing your bank statement before the rest of your friends. You look yummy, uh, I mean that's yummy." | Source

A Quick Reference

Type of Transaction
Added or Deducted
Debit on a Bank Statement
Added
Debit in a Check Register
Deducted
Credit on Bank Statement
Deducted
Credit on a Check Register
Added

Definitions of Those Unfamiliar Words

  • Cleared the bank--means that the bank has received the order for payment or deposit and has actually processed the order and recorded the amount in the account. It can take anywhere from 1 day to 10 business days for items to clear the bank (some may be longer depending on where the other bank or company is located). PLEASE NOTE--deposits of large checks or personal checks are usually held for 1 to 5 business days to ensure that they will clear. Ask when making a deposit so you do not try to use funds that are not available as this may cause fees to be applied to your account.
  • Business Day--a business day is a day the bank is actually open. This means that weekends and holidays are not considered business days.
  • Overdraft--means you have tried to use funds that you don't have and your account now has a negative balance. Banks will usually refuse a transaction that will put your account in the negative, or deny a check for insufficient funds.
  • Insufficient funds--not enough money in the account to cover the check or withdrawal.
  • Withdrawal--An amount to be removed from your account.
  • Fees--any amount charged to your account for actions the bank had to perform for you. There might be ATM fees, fees for a money order, fees for letting your account fall below the minimum required amount and there could even be fees for each check you write. Be sure to check with your bank to see what fees they will charge.
  • Hold--a hold on a check means that the bank will not release the funds for you to use until the check has cleared and the bank has the money. Also, they might put a hold on debit transactions for something you ordered on line. This could be because the company has already proven to be unreliable or because the transaction is with an international company. Check with your bank before you make the transaction so that you know what will happen. That way you won't get fees for trying to use the money before it is available to use.
  • An FYI-when you use your debit card at the pump of a gas station, the station will put a hold of up to $100 (or more ) of your money which will prevent you from using that money for about three days. Credit cards are better for these transactions, or you can go inside to pay with your debit card and use your pin number. This will usually prevent the hold.

I think the sign says it all.
I think the sign says it all. | Source

Let's Begin

Remember that the balance at the bottom of your bank statement is most likely not the same balance as your check register. This is especially true if you have a lot of transactions. So please don't look at the bank's bottom line and panic.

The first thing you want to do is look at the first page of your statement in the summation section (marked E in the illustration shown above) to see if there were any items affecting your account that you were not aware of--usually the fees section is the one you need to check. If there are any (and they are correct), be sure to record them in your check register before trying to balance it. If there is a problem, call your bank or go to the bank and ask to speak to a supervisor. The sooner you get this addressed, the easier it will be for them to fix it. And don't be afraid to go to the bank because you think you might be wrong. If you are wrong, just say something like "okay, thanks for clarifying that for me". The banks are supposed to be there for their customers.

Most people use check marks, like this one shows, once they find the transaction in their check register and verify that the amount is correct--see Section marked G1
Most people use check marks, like this one shows, once they find the transaction in their check register and verify that the amount is correct--see Section marked G1 | Source

Don't feel bad if you are confused the first time.

All those figures and check marks and...... Just try to stay focused and it will be done before you know it.

Pull Out the Check Register

Compare each charge and deposit in your register with the charges and deposits recorded by the bank. Check carefully for correct amounts and dates. (Remember that the date processed is what will show up on the bank statement.) As you move through the comparing, be aware that the figures may not have been processed in the same order. That means you may have to look for charges in your register if they are not in the same order as your statement. Put a small check mark next to the amount on your bank statement and another one next to the amount in the register as each amount is verified. I like to use a different colored pen (red) so I can see them better.

Errors, I don't know about you, but the errors I find are usually my fault and not the banks. You can correct any you find in anyway you like. Just be sure to keep it readable for future reference. I generally mark the item with an asterisk then go to the next available entry line on my register and note the transaction information and the correction. Then I put a check mark in the check column so I'm not searching for it on a bank statement later. Bank errors can usually be fixed over the phone or with a quick trip to the bank.

A Register With Check Marks For Verification

Source

Now Comes the Hard Part--Well, Not Really

  • To begin, look for the reconciliation form somewhere on the bank statement (usually on the back of the first page). It will look like the first illustration below (actually marked as Illustration #5). Not all banks are the same and so not all reconciliation forms are the same. Look for the section marked Checks Outstanding (or Outstanding Checks) and this will give you a hint that it is the form you seek.
  • In the first column (Outstanding Checks), write down the amounts of all the checks and charges that have not yet cleared the bank (items that are in your check register but are not on your bank statement). To find these items, just go back through your check register and look for items without a check mark. Write down in this column any charges (debits) that do not have a check mark next to them. If you need more lines for the amounts, feel free to write them on a sheet of paper or whatever else you would like to use. These amounts will be written in the left column in your register. Add them all up and put the figure on the bottom line of the section.
  • In the next column (Outstanding Deposits), write down any amounts that show as deposits (credits) in your check register but are not on your bank statement. Again, look for the items that do not have a check mark next to them. These amounts will be written in the right column in your register. Add them all up and put the figure on the bottom line of the section.
  • Be sure your check register is fully balanced: charges or fees you might find on the statement but not in your register (or vice versa) should be added or subtracted from your check register balance (and then marked with a check mark so you know they have been cleared).

Forms For You To Follow

Click thumbnail to view full-size
Bank Reconciliation FormCompleted Bank Reconciliation Form-Balancing Form
Bank Reconciliation Form
Bank Reconciliation Form | Source
Completed Bank Reconciliation Form-Balancing Form
Completed Bank Reconciliation Form-Balancing Form | Source

The Final Column, The Second Illustration Above

  • The final column is where you will balance everything together--wait, come back, this is the easiest part to do. Look at the final balance on your bank statement and write it on the first line. Put the amount from your Outstanding Deposits on the second line. Add the first and second lines together and put that figure on the third line (feels a little like tax time, I know). Put the amount of your Outstanding Checks column on the fourth line. Subtract this amount from the third line above it. Put this amount on the last line. This line should match the final balance in your check register. If it does (hurrah hurrah), then mark that point in your check register on the next blank line by writing something like 'came out' or 'balanced'. Draw a line through all the columns on that line so you don't accidentally use it for another transaction.
  • If the amount does not match, don't throw up your hands and walk away frustrated. You can usually fix it fairly easily. It can be something as simple as a math error or something as difficult as a missed bank transaction. This will be a little time consuming as you go back to find the error, but take joy in the fact that most of the time it is a simple calculation error which is easy to find and correct. If, after you have followed the steps below, your check register and bank statement still do not match, you can ask the bank for help. They are usually very good with helping.

Do you think you can balance your bank statement to your check register now?

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Finding the Error

To find the problem: Note-once you find the problem and your bank statement and check register balance match up, you do not have to go on with further steps.

  • Re-add each column (Outstanding Checks and Outstanding Deposits) to see if there was a mistake in your math. If it does not come out to the same number, add it once more for a confirming amount. If your math is correct......
  • Check your calculations in the third column. Add the bank balance to outstanding deposits, which should match the number on the third line. Deduct the amount on the fourth line from the amount on the third line. That final amount should match what is in your checking account.
  • Check the amounts written in your check register (with no check mark) and in the first column on the reconciliation section of your bank statement. You could have missed something from your register, or the amount in your register may be different and you didn't notice the first time.

"I did too balance my bank statement.  Now let me finish practicing my hiding abilities."
"I did too balance my bank statement. Now let me finish practicing my hiding abilities." | Source
  • Re-balance your check register starting from the last time your check register was reconciled (or from the beginning of your check register if this is your first time balancing). This is also a good place to find errors. Be careful in correcting errors because if the amounts are illegible, you may not be able to recognize them at a later time. Errors may occur in recording a transaction amount, adding or subtracting the amount from the balance or forgetting to record a fee.
  • Please note, since each bank statement only covers a month of transactions (banks use fiscal dating which means your statement will run from the date you opened it to approximately 30 days afterwards). That means you will only have to go through that month in your register to seek the correction (which is why we mark balanced and the date when it does balance). Exceptions to this rule are checks that are from one or two months prior but have not yet been cashed, checks that you failed to record, deposits that you failed to record, or incorrect amounts recorded in your register (most of these will be caught when you are comparing what the bank said came in and what you have in your register).
  • If you have not found the error(s) using the above methods, you may need help. Another set of eyes (as my mother used to say) might find what you cannot. Have your significant other check your numbers. Or ask a friend to check them. If you still can't balance, then you should take all of your papers to the bank and ask for help. They can go over the numbers with you and help you balance.

Source

A Summarized List

  1. Writing all transactions in your check register is crucial to knowing how much money you have available for spending.
  2. Check for errors in amounts when you compare them to your bank statement.
  3. Keeping receipts makes it easier to go back and check amounts you think might be wrong.
  4. Keeping your receipts for later registering in your check register means you will not forget a charge you made.
  5. Mistakes happen all the time, do not be hard on yourself just because you made a mistake.
  6. The bank does occasionally make mistakes.
  7. When writing charges into your register, use the markings above the column for guidance---there will be a minus for checks and charges and a plus for deposits.
  8. Remember to record added fees as soon as you know about them.
  9. Overdrawing your account can mean lots of fees, lost money, and a bad reputation with the bank. Banks can refuse to allow you to open an account if you have a long history of overdrawing.
  10. Finally, it is illegal to write a check on an account you know does not have enough to cover the check. This is called a 'rubber' check or 'bounced' check.

Now that the hard part is finished, why not a little cat nap before dinner?

Source

When writing a check, balancing your check register, and reconciling your bank statement to your check register, be careful. Small mistakes now can mean large fees or problems later. Just take your time. And remember your bank is your best source for assistance if you have a problem you can't fix.

© 2012 Cheryl Simonds

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