Checkbook Skills

 

AVOID ACCRUAL ACCOUNTING - CONVERT IMMEDIATELY TO TSOMETHING OTHER THAN ACCRUAL or Pre-allocated Expense Accounting (reason: balance bounce when pre-allocated income in Accrual makes for false + in balance because it has not posted yet - if you spend that money, ouch). in Pre-allocated Expense Accounting, the balance reduces for a payments only, which you can easily see if you can pay for it or not if the balance is above minimum balance or not.

[ About Pre-allocated Expense Accounting ]

[ Pre-allocated Expense Accounting Accounting ]
[[ Pre-allocated Expense Accounting's pluses: ]]
[[ How do you convert from Accrual to Pre-allocated Expense Accounting or to posted-only accounting? ]]

[ Managing a checkbook ]
[ Why a checkbook? ]

[ how: check register ]
[ Pre-allocated Expense Accounting, Accrual, Normal Accounting Reconciliation ]

[ how: credit card register using check register ]
[ credit card register reconciliation ]

[ The biggest mistakes on check registers are: ]
[ The biggest mistakes on credit card registers are: ]

[ glossary ]

About Pre-allocated Expense Accounting

This page and Pre-allocated Expense Accounting was originally made as a blessing to others, and it needs to stay that way (note to self). The stuff on Pre-allocated Expense Accountin method God came up with for this time as a blessing for people who have a hard time maintaining a check register and avoiding spending too much (making ends meet). It's a help you can sort out your regularly-occurring bills and see what's left over at the end of the month in advance. I hope it helps you out as much as it has me on my personal finances.

Solution: Pre-allocated Expense Accounting

Why? us human beings need something merciful to our bank balances that on bill day we can see what income is left over after regular Expense coming up ahead, something where we can at least see the a problem coming.

NOTE: Pre-allocated Expense Accounting cannot currrently be used for business accounting until it gets tested and approved.

Pre-allocated Expense Accounting Pluses

  • works well with normal reconciliation methods
  • it allows you to pre-allocate expenses only, that are less than originalBalance+postedIncome-postedExpense-unpostedExpense-minimumBalance (this makes it work, if you wait until income posts to pay or allocate expenses). had error on this, +unpostedExpense should be -unpostedExpense.
  • it helps avoid living by checking the account balance once per transaction or more because you can see what your regular expenses do to the current register balance.

How do you convert from Accrual to Pre-allocated Expense Accounting or to posted-only accounting?

  1. you should see what your spendable balance is. to examine what money you can spend, checkRegisterBalance should be originalBalance+postedIncome-postedExpense-unpostedExpense-minimumBalance reflects money you DO have to spend and allocate for expenses, provided you have no mistakes in balance calculation or missing, erroneous, or duplicate transaction, etc..
  2. from this point on, make no more pre-allocations of income.
  3. wait until the income posts.

About: for a normally working bank account, a very helpful tool in preventing bank balances from bouncing, helpful for normal folks.

if your bank balance doesn't reconcile right because the balance is broken, look for lost or duplicated transactions or transactions that you missed (like a missed receipt). if that still doesn't work, try a balance adjustment, but be wary about this, because if you are adjusting the balance in the positive, you could have problems accidentally spending money which might go away at some point if the balance money disappears - this is generally not a good idea to spend money that isn't really yours.

  • credits/deposits: record regularly occurring income when posted only for safety, not planned - no future stuff please or balance could bounce
  • debits/expenses: record expenses when planned for or posted (you should be able to do both), but only if I know that I can only spend a maximum of balance-minimumBalance (this means that expense is less than or equal to balance-minimumBalance).
  • periodic debits/expenses:
    1. a periodic (regularly occurring) purchase you leave DATE and CHECK NUMBER blank, to be filled in later.
    2. when you write the check for that entry, you look up in the register and fill in the check number and the date.
    3. when the item is posted, you look upward in the register and find that entry and put the posting date from your statement in the posted (check symbol) column
  • NOTE: A new or replacement column for "Post Date" is needed in the standard check register forms. You could use instead the 2 columns for posted+fee for Post Date, it makes for more accurate Reconciliation and you know in what month/statment it posted.
  • if the planned expense amount turned out to be incorrect, you:
    • adjust for it with a new adjustment entry to make the correction to the original amount with the adjustment being the difference of the expenditure in the debit column, or you can
    • credit the original amount to cancel out the original item with same check number filled in for both and same date and write new correct entry as a posted amount.
  • Normal reconciliation method
  • you can spend down a positive balance to your minimum balance amount (which you can preallocate for as "buffer" or "min balance") + monthly bank fees, and any recurring bills you pre-allocate for (look back and post into those semi-blank slots in the register).
reconciliation is same for Pre-allocated Expense Accounting as for Accrual, others, but not credit card registers
Check# Date Description of Transaction Payment/Debit(−) Code Fee(−) Deposit/Credit(+) BALANCE:700
(blank:fill in later)
(blank:fill in later)
Glingko Apartments
rent
550
      150
  2/12 Zipcoco company pay
(do not pre-allocate income!)
      2000 2150
  2/12
ATM withdrawal #12345
groceries for work
21.50
      2128.50
  (backfilled)2/14
somebill 5
dn (put in later for findability - wrong amount)     2123.50
(backfilled) (backfilled)2/14
somebill   up (put in later for findability - wrong amount)   5 2128.50
  2/14
somebill
correct bill
15       2113.50

Managing a checkbook

A bank balance of more than $0 is not proof you can buy buy buy because of unposted items - as check register let you account for those unposted items and your register balance shows you what you can spend or if you have spent too much (provided no errors). A positive bank balance only means that currently, there is money in the bank and it lists posted items in the balance. Items that have been sent off and not posted to the account can cause the bank balance to bounce if the register's balance goes below (or at) $0. To avoid this, use Pre-allocated Expense Accounting for personal which pre-allocates periodic expenses (regularly occurring) items like utility bills, phone bills, pay vouchers, and the like. In accrual, entering an income that has not posted yet can cause massive problems.

Why a checkbook?

  • It helps keep you from expensive overdrafts. if you do it right, it will keep you from overdrafts and from having to check your balance at the bank all the time at every transaction and always worrying.

  • How the whole idea works: the checkbook keeps track of expenditures and income so that you do not bounce your balance. the transactions you get, you put into your register as soon as possible. if you can't do Pre-allocated Expense Accounting, then pick something else other than Accrual accounting (look it up or ask an account about it or take a parks or college class). T accounting does not pre-allocate anything.
  • A check register fixes a problem your real bank account hides from you - it takes TIME for a deposit to get into the bank and become "posted" (the money actually put into your account). It takes even more TIME  for a check to be "cleared" (the money actually taken from the bank) - it can be as much as 2 weeks or a month. If you look at the bank's balance and trust it, those uncleared checks may get subtracted from your bank account on the day that you planned to make that big purchase or pay that big bill.
  • When the check does clear, the bank account can go negative - a bad thing for your credit rating. All because of time delays.  Some checks may not clear for several months.
  • The solution - a check register: you keep track of all income and outgoes, including the 'extra' stuff (like bank charges & ordering checks). Anything that affects your real bank account is what you put in your check register. No more surprises, unless you add or subtract wrong, or misread an amount.
  • Pre-allocation of regular bills style of accounting (Pre-allocated Expense Accounting) can help avoid overdraft fees, but cause problems when the balance needs adjustment.
  • a credit card register is a good idea IF you can remember to do it right, highly suggested to do this with a spreadsheet tab. payments are done both as +payment, and deposit as -deposit. otherwise, balance does not come out correctly. yeah, it's a bit scrambled. reason being in-the-black is debt, not income (positive balance reflects debt, not income). so addition and subtraction of items into the balance are swapped/backwards.

how: check register balance checker with spreadsheet

Most checkbook 'registers' have a little set of instructions on the front on how to use it. I like using 2 lines for each entry, so I have at-a-glance documentation of what's been going on.

Spreadsheets are great for checking the correctness of your balances (so are programs like Quicken & Microsoft Money). =C1+B2-A2 is a good formula for the balance column. Put in the following, and we'll assume you have $1000 balance to start.

 ABCD
1 check#paymentdeposit$1000
2    =D1+C2-B2
3    =D2+C3-B3
4    =D3+C4-B4
Here you take the balance from the line above it,
add the amount of the deposit(credit),
subtract any payments(debits),
and put the total in the 'Balance' box (the rightmost column) on the same line.
Once you've typed the formula in D2,
hit the Enter↵ key.
this will put the formula in and it will automatically update with the new value from the equation. 
click on D2.

Now we need copies. 
Drag the lower right corner of the cell selection down about a screenful of cells.  
it's OK if it scrolls a lot.  
let go of the mouse.

Now we need to go back to the top of the spreadsheet. 
There are 2 ways to do it. 
Hold down the Ctrl key (lower left side of the keyboard) and hit the HOME key (above the 4 plain arrow keys).  
This will take you to the top of the spreadsheet.
You can also use the mouse to go to the top of the spreadsheet by dragging the scrollbar up to the top.
You are done.
Now just fill in check stuff and the balances will be calculated for you.
If you mis-type something, or you missed an item, your electronic balance will show it when you compare it to your check register.
It could also show a problem with your check register.

The biggest mistakes on check registers are:

  • balance calculated incorrectly, such as by button mis-press. try using a spreadsheet.
  • Forgetting to put in items — checks, deposits, ATM items & fees, monthly bank charges on your account, bank fees, monthly bank interest.
  • Putting amounts in the wrong column - such as a deposit listed in the payment/debit column, or putting a check in the deposit column.
  • Double entries: Putting an entry in twice, possibly on different pages.
  • trusting the balance on the ATM slip or on a bank statement or bank printout (what about unposted items? what's whast a check register is for) - checks may not have cleared since the ATM got news of the balance, and sometimes it takes people time to deposit the check (this is not a recommendation).
  • trusting the balance on your monthly bank statement.
  • entering in $20 ATM's twice - the solution is to put down the little unique ATM transaction or semaphore numbers on the slip (about 4-8 digits) onto the check register, and record the ATM so you know it's already been put into the check register.

example check register
Check# Date Description of Transaction Payment/Debit(−) Code Fee(−) Deposit/Credit(+) BALANCE:700
1234
2/12
Glingko Apartments
rent
550
      150
  2/12 Zipcoco company pay       2000 2150
  2/12
ATM withdrawal #12345
groceries for work
21.50
      2128.50
  2/14
somebill 5
dn (put in later for findability)     2123.50
  2/14
somebill   up (put in later for findability)   5 2128.50
  2/14
somebill
correct bill
15       2113.50

What is shown here is a little check register, filled out.

The balance column shows the total amount you really have in your bank, AFTER an items has been added or subtracted.  You can't see the line above check#1234, but if you could, the balance would be $700.
After making a $550
payment for the rent with check#1234, $150 is left, and that has been put in the balance column ($700 − $550 = $150).
Then, a paycheck came in, $2000, and this was added to the balance ($150 + $2000 = $2150).
Then a trip to a bank machine (ATM),
a withdrawal of $20 was made,
with $1.50 charge from the machine (ugh),
leaving $2128.50 in our 'virtual bank' (check register).

if your bank balance doesn't reconcile right because the balance is broken, look for lost or duplicated transactions or transactions that you missed (like a missed receipt). if that still doesn't work, try a balance adjustment, but be wary about this, because if you are adjusting the balance in the positive, you could have problems accidentally spending money which might go away at some point.

how: credit card register using separate check register

it's highly suggested you use a spreadsheet to do credit card balance validation, reason being that + and - actions are swapped and it's easy to make a mistake.

With credit cards, you can usually put money into them, and even if you don't have the money at the time, you can take money out of them, but you still have to pay the money you trook out back, but with interest. If you have a limit that's too low to live in an apartment, see if you can have your debit card or credit card limit raised to match your credit card needs.

as of 3/29/2018, credit cards charge interest. the amount you think you have should actually be adjusted once in a while to the bank's balance, preferably once a month when you get your bill.

this is if you want a record of what you spent.

at the top of each page in the register, use a pencil or pen to write + in the payment column and - on the deposit column. I like using 2 lines for each entry, so I have at-a-glance documentation of what's been going on.

Spreadsheets are great for checking the correctness of your balances, and highly suggested for removing user error in calculations. I learned you can get the +/- swapped really wrong really easily. 3 columns: A, B, C. in C, fill c with =C1-B2+A2 is a good formula for the balance column. Put in the following, and we'll assume you have $1000 balance to start.

spreadsheet balance checker
 ABCD
1 check#write in +
payment
write in −
deposit
$1000
2    =D1-C2+B2
3    =D2-C3+B3
4    =D3-C4+B4
Here you take the balance from the line above it,
subtract the amount of the deposit(credit) (actually, deposits are a debit and payments are a credit in a debt-based accounting liek credit cards,
add any payments(debits),
and put the total in the 'Balance' box (the rightmost column) on the same line.
Once you've typed the formula in D2,
hit the Enter↵ key.
this will put the formula in and it will automatically update with the new value from the equation. 
click on D2.

Now we need copies. 
Drag the lower right corner of the cell selection down about a screenful of cells.  
it's OK if it scrolls a lot.  
let go of the mouse.

Now we need to go back to the top of the spreadsheet. 
There are 2 ways to do it. 
Hold down the Ctrl key (lower left side of the keyboard) and hit the HOME key (above the 4 plain arrow keys).  
This will take you to the top of the spreadsheet.
You can also use the mouse to go to the top of the spreadsheet by dragging the scrollbar up to the top.
You are done.
Now just fill in check stuff and the balances will be calculated for you.
If you mis-type something, or you missed an item, your electronic balance will show it when you compare it to your check register.
It could also show a problem with your check register.

The biggest mistakes on credit card registers are:

  • balance calculated incorrectly, such as by button mis-press. try using a spreadsheet. make sure your head is in gear for this one, + and - calculations for balance in a spreadheet and register are swapped because in-the-black numbers are debt, not income.
  • Forgetting to put in items — checks, deposits, ATM items & fees, monthly bank charges on your account, bank fees, monthly interest.
  • Putting amounts in the wrong column - such as a deposit listed in the pmt column, or putting a check in the deposit column.
  • Double entries: Putting an entry in twice, possibly on different pages.
  • trusting the balance on the ATM slip or on a bank statement or bank printout (what about unposted items? what's whast a check register is for) - checks may not have cleared since the ATM got news of the balance, and sometimes it takes people time to deposit the check (this is not a recommendation).
  • trusting the balance on your monthly bank statement.
  • entering in $20 ATM's twice - the solution is to put down the little unique ATM transaction or semaphore numbers on the slip (about 4-8 digits) onto the check register, and record the ATM so you know it's already been put into the check register.

note here that credit card balance is debt, not income, so + balance amounts are debt, and - balance amounts are income or money in the bank so to speak.

example credit card register
Check# Date Description of Transaction Payment/Debit(+) Code Fee(−) Deposit/Credit(−) BALANCE:700
 
2/12
Glingko Apartments
rent
550
      1250
  2/12 Zipcoco company pay       2000 -750
  2/12
ATM withdrawal #12345
groceries for work
21.50
      -728.5
  2/14
somebill 5
dn (put in later for findability)     -723.5
  2/14
somebill   up (put in later for findability)   5 -728.5
  2/14
somebill
correct bill
15       -713.5

What is shown here is a little credit card register, filled out.

The balance column shows the total amount you really have in your bank, AFTER an items has been added or subtracted.   You can't see the line above rent pmt, but if you could, the balance would be $700.
After making a $550
payment for the rent with check#1234, $150 is left, and that has been put in the balance column ($700 − $550 = $150).
Then, a paycheck came in, $2000, and this was added to the balance ($150 + $2000 = $2150).
Then a trip to a bank machine (ATM),
a withdrawal of $20 was made,
with $1.50 charge from the machine (ugh),
leaving $2128.50 in our 'virtual bank' (check register).

if your bank balance doesn't reconcile right because the balance is broken, look for lost or duplicated transactions or transactions that you missed (like a missed receipt). if that still doesn't work, try a balance adjustment, but be wary about this, because if you are adjusting the balance in the positive, you could have problems accidentally spending money which might go away at some point.

Pre-Allocated Expense Accounting, Accrual, Normal Reconciliation

You should reconcile your checkbook every month with the ending balance that the bank shows. The bank includes a sheet on the back of your statement to reconcile your check register. Hopefully you get a paper statement to reconcile with.

You sum up all your check register items that don't show up in your bank statement (checks/debits/ATM-withdrawals) and that is set as one calculation. Your deposits are another calculation. You also factor in the bank balance from the statement, and the balance from your check register (you should keep that current). I have a javascript-driven reconcile program/web page here, or you can download this reconcile-example.xls Excel Spreadsheet, which is simpler to use. Also, there is a little convenient reconciliation form on the back of most check statements, where you can do the calculations yourself. If it is not big enough, just take the general concept into practice and come up with your own, just make sure it works the same.

if you were to try to reconcile based on your online register, people don't usually do that and most consider it a mistake, but it is do-able. you can do that of course, it just means that you have to go by that online bank balance as an ending balance rather than using the paper one, and you would also use the online list of items to check off (print it out). be warned, however, that it messes you up for next month's reconciling, because you will be re-counting some of the items twice... You would need to make sure you don't count those items a 2nd time when your next statement comes by going through and comparing both lists.

Every once in a while you find that you have made a mistake on your check register way up above. I usually resolve this by making notes on the wrong entry and by also making similar notes in an adjustment entry at the bottom of the check register.

  • If you put a deposit in the payment/debit column by mistake, it will show up in your reconciliation as a check register balance being off in the negative direction by double the amount of the deposit. You should make an adjustment by putting double the amount of the deposit in the deposit/credit column.
  • If you put a check/atm in the deposit/credit column by mistake, it will show up in your reconciliation as a check register balance being off in the positive direction by double the amount of the check. you should make an adjustment by putting double the amount of the check/debit/atm in the payment/debit column. then it is probably a good idea to check your bank balance!
  • if you enter an item with the wrong amount, it will differ from your statement, and it will show up as a difference in your reconciliation balance.
  • WARNING: If you pre-allocate for debits/withdrawls/checks/transfers-out, make sure you do not pre-allocate for income/credits/transfers-in because it will cause your balance to bounce. Why? if you try to spend that money, it's not going to be in the bank yet, is it? no, it's not because that amount is not posted yet. so until then it's a false positive. it's OK to pre-allocate for debits, because they reduce your balance and you can make sure your "new" balance does not down too far even though the money has not been spent yet. that is wise spending and it keeps you safe from mistakes just make sure you pre-allocate properly every time period like every paycheck (month? 2 weeks? week?).
  • you can pre-allocate funds for regularly-occurring bills (but not income) that need to be paid. when the time comes for the money to be there, it's been pre-allocated.
  • reconcile normally, using pre-allocated payments as payments.
  • you can spend down a positive balance to your minimum balance amount (which you can preallocate for as "buffer" or "min balance") + monthly bank fees, and any recurring bills you pre-allocate for (look back and post into those semi-blank slots in the register).

Credit Card Register: only difference is you add payments and subtract deposits in debt-based financing.

for example:

reconciliation example
Check# Date Description of Transaction Payment/Debit(−) Code Fee(−) Deposit/Credit(+) BALANCE:700
1234 2/12 Glingko Apartments
rent (error)
  dn (put in later)   550 1250
made adjustment below
  2/12 Zipcoco company pay 2000       3250
made adjustment below
  2/12 ATM withdrawal #12345
groceries for work
21.50       3228.50
  2/12 somebill
recorded in wrong column
dn (put in later)     500 3728.50
  2/12 somebill2
25       3703.5
  2/12 somebill
cancellation of erroneous entry (T accounting)
500 up (filled in later)     3203.50
  2/12 somebill
rewrite correctly
500       2703.50
  2/12 somebill
recorded correctly
1500 up (put in later)     1203.5
1234
2/12
Glingko Apartments
rent. cancellation of entry
550.00   up (put in later)  
653.50
adjustment for above
1234
2/12
Glingko Apartments
rent.
500.00   up (put in later)  
153.50
adjustment for above
  2/12 Zipcoco company pay       4000 4153.50
adjustment for above

glossary

Pre-Allocated Expense Accounting
Pre-Allocated Expense Accounting takes regularly occurring payment transactions and pre-allocates those funds in the register, filling in the transaction when it is paid. Income is only recorded when it is posted (comes in to the account). You can keep your old recordkeeping in place, see conversion. Waiting for email approval of this method to be used in business.
payee
the person or entity paid
item
checkbook transaction. an entry in the checkbook.
posted:
checks that have cleared the bank.
debit column:
credit card register is Deposit/Debit + (different), check register is Withdrawal/Debit -
credit column:
credit card register is Withdrawal/Credit - (different), check register is Deposit/Credit +
check register:
+ balance shows income. − balance shows payment is needed. a recordbook you ask for from your bank (it's free), which slides into your checkbook and allows you to record your transaction date, description, payment amount, whether it was posted (or posteing date), fee, deposit amount, and the current balance. the current balance is not your bank balance! it is the money you have left after you have written checks. this is your "real" balance. this balance tells you, if the bank were to suddenly post all of your transactions, how much you would have in the bank! This is why we have a check register. it's so we avoid overdrafts (our bank account going negative, and the associated $35 charges when the account goes negative or another transaction posts).
credit card register:
same as check register except that: − balance shows income. + balance shows payment is needed.
check register wallet:
a vinyl (plastic) holder for your check register with flaps thick enough to prevent writethrough (a condition where writing on one check writes through to the next check, maybe a third check, and so on, if you are using duplicate checks). it also protects it and makes it easy to identify, and holds your checks below (the big flap), and check register above. these are free from your bank, you just ask for one.
Overdrafts:
it's about $35-$100 charged to your bank account when a bank account goes negative or another transaction tried to post when it's too low. this is something you want to avoid because the costs get high fast.
checkbook/check register reconciliation.
this takes your bank's balance from your last statement, your current balance from your check register,
and your outstanding items (items that have not been listed in any of your bank statements),
and figures out if the result is zero ($0).
if it is, congratulations, you have reconciled your account for this month.
you should do this every month.
If it does not reconcile, try to find the items that are missing or were entered incorrectly.
you may have also calculated your checkbook balance incorrectly (it happens) - you can check it with a simple spreadsheet that subtracts one column and adds the next column from the previous balance and stores the result in the current balance.
then copy that formula down about 200 or 300 rows and you are set.=D3+C4-B4 where b column is payment, c column is deposit, and d column is balance, just like in your check register. the top balance number is your starting balance, for instance, from the start of the last reconciled month or if you have never reconciled, your first statement. You may have to make an adjustment to your balance by some amount.