Just about everyone uses a bank checking account to handle all their financial transactions. Deposits come into the account and money goes out to pay bills, cover expenses, invest or add money to your savings account. These transactions can be personal finances or related to your job. Some will be deductible on your tax returns and some not deductible.
The best way to keep up with all these transactions is to use a check register.
Checkbook Register Definition
A checkbook register is a ledger used to record all the transactions that pass through your bank account and keep a running balance. If you have a paper checkbook with your account, it will often come with a checkbook register you can use to record the check number, the date, the amount of the check and name of the party, the payee, receiving the check. It’s also helpful to make a note in the memo section detailing the purpose of the check.
Now that debit cards, ATM withdrawals and online transactions have become more common, it’s convenient to keep track of banking transactions using a spreadsheet on your computer or an online app.
You may wish to specifically mark certain transactions, such as business purchases, medical expenses or purchases on behalf of a dependent, if they will have a special significance when you seek reimbursement from an employer or file your taxes.
Logging your transactions can be useful for your own records and will also be useful if you ever become ill or pass away and your relatives or heirs need to be able to understand your finances.
Recording Digital Transactions
To make sure your register is fully up to date, you'll also want to record any electronic transactions to your register. This can include automatic deductions to pay bills, direct deposits of your paycheck or other payments and purchases you make with your debit card. ATM withdrawals and deposits can also be recorded to your checkbook register.
Since you likely won't carry your register with you when you’re away from home and may not have time to immediately make a note of every transaction you make at the time you make it, save receipts and use them to update your checkbook register later in the day.
Keeping an Electronic Record
If you prefer the convenience of a digital record, you can keep your check register digitally rather than on paper. This may make the ledger easier to share with others, like your accountant, for further analysis and reports, such as tax returns. Having these records is useful for budgeting and controlling your expenses
You can download a template for spreadsheet programs like Microsoft Excel to develop a check register, or you can create one yourself using a tool of your choice. As with a paper register, log the date, party and amount of each transaction, along with any notes you need to remember the nature of the payment or deposit.
As with other important electronic records, make sure your digital transaction log is properly backed up and stored securely to prevent anyone unwanted from getting access to your financial data.
Balancing Your Checkbook
Balancing your checkbook is a process used to verify that your checkbook account balance matches the bank records.
When you receive your monthly statement, take your ending balance from your previous month’s statement and add in all the deposits from your checkbook register. Subtract any debits from your account recorded in the register, including checks written, ATM and teller withdrawals, interest payments and debit card transactions to get your current balance.
Compare the number to the balance on your bank statement. If there's a discrepancy, see if there are transactions in your records that aren’t yet reflected in the statement, such as outstanding checks. If that doesn’t resolve the issue, see if a transaction was recorded by the bank in the wrong amount or if the bank has an erroneous transaction on your statement.
Balancing your checkbook is an important process to make sure you have an accurate running balance in your check register. This process helps make sure you don’t write checks or make any other payments that will overdraw your account and incur stiff overdraft fees.
Gather your records and contact your bank if there’s a discrepancy in the numbers.
James Woodruff has been a management consultant to more than 1,000 small businesses. As a senior management consultant and owner, he used his technical expertise to conduct an analysis of a company's operational, financial and business management issues. James has been writing business and finance related topics for work.chron, bizfluent.com, smallbusiness.chron.com and e-commerce websites since 2007. He graduated from Georgia Tech with a Bachelor of Mechanical Engineering and received an MBA from Columbia University.