Your roommate, Samuel, is embarrassed. He has never before had a checking account, but he finally opened one last month. He’s standing in the doorway of the kitchen with his check register in one hand and his recently arrived bank statement in the other. Admitting that he doesn’t know what to do next, he’s asked for your help in learning how to reconcile, or balance, his checkbook.

Being both a good friend and a student of personal finance, you’ve agreed to walk Samuel through the process. Moreover, knowing the value of asking and answering good questions when learning how to do something, Samuel agreed to answer your questions about the process.

SAMUEL: Thanks for helping me with this bank statement thing. So, where do we start?

YOU: Let’s start with some preliminary questions. I’ll ask and you answer, and we’ll agree on some fundamentals about reconciling bank accounts.

So, why is it a good idea to reconcile your bank account or balance your checkbook?

SAMUEL: According to my personal finance book, reconciling my account will help me spot potential errors in the bank statement or my own records, and it will verify my account’s actual balance as of thereconciliation date .

YOU: You’re absolutely correct! Now, according to the experts, how frequently should a bank reconciliation be performed, and how frequently should ongoing or between-statement deposits and withdrawals be verified with the bank?

SAMUEL: That’s an easy one. I remember reading that I should reconcile my bank accountmonthly , but I should verify my ongoing deposit and withdrawal transactions online every couple of days.

YOU: That’s right! Now that you’ve got the fundamentals under control, let’s go through the actual process of balancing the checkbook.

Now, with Samuel’s latest bank statement and his check register or ledger in hand, you can examine the documents. Use the grey slider along the right-hand side of each of the following boxes to see Samuel’s bank statement and check register (account ledger).

Fourth State Bank of San Francisco, CA

		Statement of Account
Samuel Smythe				March 2011
550 Angel Street
San Francisco, CA				Account 348596
Date	Description	Subtractions	Additions	Balance
3-01	Previous balance			$1,647.00
3-01	Deposit		$250.00	1,897.00
3-03	Check 300	$600.00		1,297.00
3-04	Check 301	300.00		997.00
3-05	ATM withdrawal	25.00		972.00
3-05	Deposit		62.50	1,034.50
3-11	ATM withdrawal	35.15		999.35
3-15	Deposit		250.00	1,249.35
3-18	Check 302	180.00		1,069.35
3-21	ATM withdrawal	47.65		1,021.70
3-22	Deposit		87.50	1,109.20
3-24	Check 303	60.00		1,049.20
3-26	ATM withdrawal	50.00		999.20

Samuel’s Account Ledger

Date	Transaction Description	Deposit	Withdrawals	Balance
Mar-01	Deposit - Payroll	$250.00		$1,897.00
Mar-03	Check 300 - Rent		$600.00	1,297.00
Mar-04	Check 301 - Car payment		300.00	997.00
Mar-05	ATM withdrawal 87501		25.00	972.00
Mar-05	Deposit - Birthday gift	62.50		1,034.50
Mar-11	ATM withdrawal 89502		35.15	999.35
Mar-15	Deposit - Payroll	250.00		1,249.35
Mar-18	Check 302 - Groceries		180.00	1,069.35
Mar-21	ATM withdrawal 93503		47.65	1,021.70
Mar-22	Deposit - Stipend	87.50		1,109.20
Mar-24	Check 303 - Bookstore		60.00	1,049.20
Mar-26	ATM withdrawal 94504		50.00	999.20
Mar-27	Check 304 - Dry cleaning		48.00	951.20
Mar-27	ATM withdrawal 97505		100.75	850.45
Mar-27	Check 305 - Car insurance		120.00	730.45
Mar-28	Deposit - Belated birthday gift	187.50		917.95
Mar-29	ATM withdrawal 99506		37.50	880.45

Using the documentation from the bank and from Samuel’s check register, construct the bank reconciliation statement for March 29.

(Note: Any items that you enter into the bank reconciliation statement should be entered in the order in which they appeared on the account ledger and bank statement.)

A.

Samuel Smythe’s Bank Reconciliation for March 29
Ending balance per bank statement, March 26
Add: Deposit in transit
Deduct: Outstanding checks and ATM transactions
Check number
ATM number
Check number
ATM number
Total withdrawals
Adjusted bank balance
Balance per books, March 29