Reconciling Accounts Personal Finance Lab What is Reconciling

Reconciling Accounts Personal Finance Lab

What is Reconciling Accounts? Definition ● Reconciling your accounts means proving that your balances match what is expected. For example, if you spend $100 at the store, then your account should show that you spent $100 (no more or no less). ● When checks were more popular it was necessary to record every transaction to ensure that everything matched up but, with the introduction of online banking this whole process is a lot easier in the 21 st century.

Reconciling for the 21 st Century Entry Errors at Storefronts ● When you swipe your debit or credit card at a store it is often processed separately from regular cash payments. You normally get two receipts of this is the case. It is important to make sure the receipt is the correct amount. Also, if it it is a big purchase you should save your receipt and check it with your bank statement. Longer Processing Times ● It is possible that when you swipe your debit card that it takes 1 -2 days to process your payment. It is important to make sure you know your card is charged right away to ensure that you do not get overdraft fee if all the payments come in at once.

The 10 Minute Reconciliation ● This process is important to do each month to ensure that your accounts are all correct and up to date ● Step 1: Confirm your big purchases match your receipts ○ Do this for your 10 biggest purchases of the month, just to make sure there were no errors ● Step 2: Make sure all your deposits are accounted for ○ This makes sure when you see your final bank balances to figure out your “net worth”, you are getting an accurate number ● Step 3: Make sure your payments are accounted for ○ ● Particularly larger payments, like the week’s grocery trip, or some gifts you bought online Step 4: Record your totals ○ Once you have established your true bank balance, record this number in your spreadsheet for future reference. This helps you later determine how your spending is moving from month to month.