by KissyO

Created on: July 23, 2008

Balancing a checkbook is one of the most important steps a person can do to protect their hard-earned money. Any number of simple things can sabotage your checkbook. It's human nature to make mistakes in addition or subtraction in your checkbook journal. While you're standing at a checkout counter with lots of others impatiently waiting behind you, you might forget to enter a large check you've just written. The bank's data processor could very easily encode the bottom of your deposit with an amount less than you deposited. Someone else's debit could have been deducted from your account because your account numbers are only X digits apart. Your best friend might have borrowed your ATM card intending to pay you back, but neglecting to, for that large amount of cash they thought they needed. Not to mention someone's intentional theft of funds out of your account with the help of identity theft. Unexpected situations could leave your reputation on the line at the bank and with merchants if you don't protect yourself by diligently balancing your checkbook with your bank statement. Before you can balance your checkbook you need to understand a two basic accounting terms: debits and credits.

Debits are any items that lower your balance. These could include checks you have written, purchases you have made with your debit card, cash you have withdrawn at the ATM or additional cash with your debit card purchases. Debits include fees charged for having your bank account called service charges, overdraft fees or uncollected fund fees charged by the bank. Debits can also be electronically generated items you have approved to debit your account for car insurance, utilities, or items bought over the Internet. There are any numbers of acronyms used by the bank to stand for checks you have or haven't written that have been converted to an electronic or invisible item debiting your account even more quickly than the old style paper check. Sometimes the merchant will give you back the paper check and tell you they are electronically debiting your account and other times they don't. Either way, your account will be debited and you need to account for these entries in your checkbook or accounting software.

Credits are any items that raise your balance. These could include deposits of cash or checks that you personally took to the bank. You will have received a receipt for these deposits. Sometimes you might have used your debit card and deposited your money and checks at a convenient

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