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Checking Account Exercises

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Calculate checking account activity


Your 18-year-old daughter was given $1,000 cash as a graduation gift. She wants you to “hold” the money for safekeeping. Over the next week, she “spends” her money as follows:

OPENING BALANCE: $1,000.00

Monday: $40 on a movie with friends, her new balance is:

Tuesday: $350 for tires for boyfriend's car, her new balance is:

Wednesday: $200 gift for her best friend, her new balance is:

Thursday: $200 to help save the whales, her new balance is:

Friday: $200 loaned to brother for skateboard, her new balance is:

Saturday, $40 for dinner out and a movie, her new balance is:

Sunday, $30 to actually buy you a birthday gift, her new balance is:

If you were a real bank, you would charge her a $25.00 bad check fee for the activity of Saturday. You would charge her another $25.00 bad check fee for the activity of Sunday. Include the bad check fees in the appropriate balances.

What is your daughter’s balance on the following Monday morning?

(Here's the answer - don't peek until you calculate it !)

If your daughter carries a negative balance over several days, there is a surcharge the bank will add to the negative balance. Assume the surcharge is $10 a day each day the account has a negative balance and your daughter had a negative balance of $110 for six days.


What would her balance be at the end of the sixth day?


She brings you $60 to make up for the short fall. You explain that her balance is negative $170. Once you apply the $60, her balance will still be negative $110. She says it will take her 14 days to get that much money, and each day she'll be charged another $10.

How much will her balance be in two weeks?


As her parent and her banker, how would you coach your daughter on her spending habits? On her money management?

Describe your discussions:

A New Example: Tracking Your Transactions with the Bank


Assume that on Friday morning, you have a starting balance of $815.49. You deposit your paycheck on Friday afternoon in the amount of $712.12.

What is your balance five minutes after you make your deposit?



Assume there is no other activity with your account takes place AND the bank validates your deposit...

What is your balance on Tuesday morning?



Next, you pay your bills Tuesday evening and mail them Wednesday morning. Your six bills total $1,001.16.

What is your balance at the bank Wednesday afternoon?

Answer:



When will each of those bills clear the bank?

Answer:

Your checking register will look like this on Wednesday morning:

ITEM

Withdrawal

Deposit

Balance

Friday Morning
Current Balance

 

 

$815.49

Friday Afternoon
Deposit

 

$712.12

$1,527.61

Less Mortgage Payment

$450.34

 

$1077.27

Less Water Bill

$78

 

$999.27

Less Utility Bill

$111.16

 

$888.11

Less Cable Bill

$45.88

 

$842.23

Less Car Payment

$276.55

 

$565.68

Less Credit Card Payment

$39.23

  

$526.45

Be aware that deposits and debits are recorded by your bank at unpredictable times -- always days later than you make the deposits or send the checks. You should manage your record keeping to give transactions time to clear. Here's another look at the example above, showing what would happen if you didn't account for the delay:

 

 

Your preception of balance

Actual balance at the bank

ITEM and DAY POSTED

Actual Activity

Friday Morning
Current Balance

 

$815.49

$815.49

Friday Afternoon
Deposit $712.12

 

$1,527.61

$815.49

Monday Mortgage Payment

- $450.34

$1077.27

$365.15

Tuesday Water Bill

- $78.00

$999.27

$287.15

Wednesday Utility Bill

- $111.16

$888.11

$175.99

Thursday Cable Bill

- $45.88

$842.23

$130.11

Friday Car Payment

- $276.55

$565.68

-$146.44

$30 overdraft fee

- $30.00

 

-$176.44

Monday Credit Card Payment

- $39.23

$526.45

-$215.67

$30 overdraft fee

- $30.00

 

-$245.67

$10 daily overdraw fee

- $10.00

 

-$255.67

Deposit clears

+ $712.12

 

$456.45

ENDING BALANCE

$526.45

$456.45



How much difference is there between the real final balance and your perception of the balance?


Why is there a difference?


Why are the day-to-day balances different? (Select one)
The bank made mistakes
The US mail took too long
You didn't account for the delay in the posting of your deposit


If your account doesn't balance, double check your additions and subtractions

Most bank reconciliation errors are due to simple oversights. It's satisfying to successfully reconcile your accounts. You also protect your credit and your money when you avoid overdrafts and other problems that come from sloppy banking.


Describe how to improve your life by balancing your bank statements and personal check register:

 





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