The Checkbook or Ledger

When writing checks, each check should be recorded in a ledger. The ledger keeps a running balance, with debits listed by their check numbers, payees and the total amount paid.

The Bank Statement

The bank statement is compiled monthly by the bank and sent to customers. It lists the starting balance, the ending balance, all deposits and all checks that were cashed in the period along with any additional fees affecting balance totals.

Reconciling

By comparing the checks the bank has cashed with the ledger entries, the customer can determine which checks are still outstanding and can deduct these amounts from the ending balance on the bank statement. This represents the actual funds the customer has available to spend.

Errors

By reconciling line by line, the customer has the opportunity to flag items that are not consistent with her ledger. This may be overcharges, fees or unknown charges, suggesting fraud.

Proper Money Management

Reconciling a bank statement and knowing how much money is available in one's account are basic tenets of intelligent money management. If a error is made as a result of not knowing whether a check was cashed or not, fees charged to the account are the customer's responsibility.