What Is Balanced About an Account Balance?
Original post by Cindy Quarters of Demand Media
An account balance refers to the amount of money remaining in an account at any given time. In order for the account to be balanced, it must agree with the amount the bank or other financial institution says is in it. Account owners should check this on a regular basis and confirm that the bank statement is reporting the correct amount. Any discrepancies should be investigated immediately. Most banks will help account owners track down problems with the account.
A checking account typically has a lot of activity, since this is the account most people use to pay bills and make purchases. It is essential that the account owner keep an accurate record of checking account activity so that he always knows how much money is in the account. To balance a checking account, the checkbook register, where deposits and checks written are recorded, has to match the monthly statement from the bank. Any activity not reflected in the bank statement must be accounted for. Ultimately, when the account holder’s balance matches the bank’s balance for the account, it is said to be balanced.
A savings account works much the same as a checking account, but usually has far fewer transactions each month. It is still important to reconcile the owner’s records with the bank statement on a regular basis. Such things as deposits, transfers, overdraft protection for a checking account and interest all need to be checked and matched to make sure the savings account is balanced.
The statement for any type of a retirement account, such as a Roth IRA or a 401(k), should be carefully scrutinized to make sure the account balance is correct. This means that any withdrawals need to be accounted for, though these are rare unless the account owner is retired. Since many retirement accounts are funded through automatic payroll deposits, payroll stubs should be checked to make sure the deposit amounts have been correctly reported and are reflected in the account balance. Service fees and other costs must also be taken into account. When the owner’s records match the bank’s records, the account is in balance.
Always keep receipts for deposits into an account. These will be needed if the bank doesn’t properly record a deposit, either by missing it altogether or by entering the incorrect amount. The same is true for withdrawals from the account. The type of receipt will depend largely on the type of account, but in general it is important to keep checks, credit card receipts, cash withdrawal slips and any other transaction records. Debit or check card transactions should always be recorded immediately, as these are easy to overlook and can cause an account to be overdrawn.
- Carol Cowling; Certified Public Accountant; Waterville, WA
- Mapping Your Future: Manage Your Bank Accounts
About the Author
Cindy Quarters has been writing professionally since 1984, creating both user manuals and training documentation. She also writes travel, pet and gardening articles, with work published in "Radiance Magazine" and the "AKC Gazette." Quarters earned a Bachelor of Arts in English from Washington State University, as well as a master's degree in management information systems from West Coast University.