Do You Know Your Bank Balance?

Have you ever issued bounced checks? Do you know your available bank balance before you issue a check? Do you maintain a daily record of your banking transactions? The only way to have a trouble-free relationship with your bank is to keep your bank accounts in order. The only way to do it is to keep your own record and reconcile it with the monthly bank statements. Here are the things that you can do so that you are in control

of your own bank accounts:

1.       Keep a simple record: You can keep track of your banking transactions on a piece of paper or you can use Excel to do a better job. From your opening bank balance just deduct checks issued and add money deposited so that you will know the balance in your account:

Your own record

Date                  Transaction                         Amount               Balance

01/05/2011     Opening balance              1500.00                 1500.00

03/05/2011     Check issued No. 1001    900.00x                  600.00

10/05/2011    Check deposited                500.00 x               1100.00

20/05/2011     Check issued No. 1002    700.00 x                 400.00

31/05/2011     Check issued No. 1003    200.00                   200.00

31/05/2011     Check deposited              1000.00                1200.00                                

2.       When you receive the bank statement: You knock off those similar items in the bank statement and your own records such as checks issued and money deposited. There will be outstanding items appearing in the bank statement as well as your own record. Now you should take up those items in the bank statement that you have not taken up in your own records such as interest, standing orders, and other bank charges. These charges are to be deducted from the balance of your own record.  The final figure is the closing balance of your bank account

. However, it is not the amount available in your bank that you can use. You have to do a reconciliation with the bank statement to determine the available fund.        

Bank statement (It is assumed that your opening balance and the bank’s opening balance are the same)

Date                  Transaction                         Amount               Balance

01/05/2011     Opening balance                    1500.00                +1500.00

05/05/2011     Check No. 1001                     900.00x                 +600.00

12/05/2011     Check Deposit                        500.00x                +1100.00

22/05/2011     Check No. 1002                     700.00x                  +400.00

31/05/2011     Bank charges                            50.00x                  +350.00            

Your own record updated

31/05/2011     Bank charges                           50.00x             1150.00

                            -

3.       The process of reconciliation: Remember there are some items in your own record which are not reflected in the bank statement, such as checks issued and money deposited not taken by your bank. You should now deducted those unpresented checks and add money deposited but not yet taken up by the bank from the bank balance to arrive at the reconciled balance. This figure should be the same as your own closing balance.

Bank Reconciliation Statement as at 31/05/2011

Balance as per bank statement                                                 350.00

Add:  Amount deposited but not taken up by bank                 1000.00

 Less: Amount withdrew but not yet taken up by bank            200.00

Balance as per your own record                                            1150.00

You can do reconciliation at any time because you can go online to check your bank accounts.  But what is the available fund that you can utilize?   

             

4.       What is your available balance: The fund that you can safely mobilize is the amount stated in the bank statement less all unpresented checks issued by you. According to my simple example, you can now safely issue checks up to   950.00 without bouncing a single check. 

Reconciled Balance                                                       1150.00

Less: Amount withdrew but not yet taken up                  200.00

Available fund                                                                 950.00

Do you think this article is helpful to manage your bank accounts? 

Source: Do You Know Your Bank Balance?