Reconciling Bank Accounts in QuickBooks®

Hi, I’m Jayne Miller, the QuickBooks Gal. Welcome to another in our series of “Quicklets” –informational podcasts about QuickBooks and related bookkeeping topics.

Today, I’m going to talk about Reconciling Bank Accounts in QuickBooks®.

Nothing is so important and so overlooked in the bookkeeping process as performing monthly bank reconciliations. QuickBooks makes this process as easy as it could possibly be. Everyone should be in the habit of reconciling each checking, savings, credit card, or other financial accounts when they get a statement from the bank or issuing institution that holds these accounts.

Monthly reconciliations allow you make sure your that books are accurate, on-track, and gives you the opportunity to head off problems at the pass… before they become HUGE problems. To do your bank reconciliation, just grab your statement, open your QuickBooks file, go to the “Banking” menu and select “Reconcile.”

Now you should be able to enter the date of your statement, the ending balance, the date for your service charges and interest (this should be the same date as your statement), and the accounts you want to code your interest and service charges to. The beginning balance is already filled in for you and either comes from the ending balance of your last bank reconciliation or is zero because you’ve never done this before.

There are only three places where you can have errors in the bank reconciliation, and two of them are right here – the beginning and ending balance. If those are right, the only place left where you can have errors is in the actual activity, which you’ll see once you press “continue.”
Once you press continue, you’ll see a new “split” window with checks and deductions in the left window and deposits and credits in the right window. At the top, you will also see a check box where you can select the option to view only activity before or as of the date of the statement you are reconciling to…put a check mark in the box to make reconciling easier.

Now you simply put check marks next to each deposit, check, withdrawal, etc that matches with your bank statement. Generally, you will be able to check off everything that is on your statement, everything will match and you’ll just about be done.


However, a few complications can pop up:

One I see a lot stems from the use of outside payroll services. Users often record the expenses as a single Payroll check without the detail of each individual check. If your payroll system clears individual checks through your checking account, it’s nearly impossible to reconcile. To get around this I suggest creating a “Payroll in Transit” account which can be used to reflect the difference between the bank activity that clears and the unidentified individual payroll checks that are a part of the bulk transaction that was entered from Payroll company reports.

The best way to avoid this, however, is to open a separate checking account for payroll and then just transfer funds from the operating account to the payroll account just before payroll. I like this method because I only fund the payroll account when needed and it prevents putting the entire operating account funds at risk. Whenever there is an outside source accessing my accounts, I consider all funds at risk…whether malicious or accidental. When I have a dedicated account, I can control the potential loss.

Another potential problem or difficulty in reconciling is Credit Card deposits. Some processors take the discount off the deposit as it occurs…others discount at the end of the month. Additionally, just as it happens with payroll, sometimes you close your credit card system out at the end of the day and only part of the daily activity clears and reflects on the bank statement…could be dating, could be the time of day, could be that you have AMEX and Discover mingled with Visa and MasterCard. At any rate, you may have to create an account for “Credit Cards in Transit” against which you can make adjusting entries that allow you to balance. This is why I have the same policy for accepting credit cards as I have for payroll. I have a dedicated checking account for my credit card processing. I move the funds to the operating account weekly…it makes reconciling both accounts simple.


Back to reconciling:

When your statement balance and your cleared balance agree and your discrepancy balance in the lower right-hand corner of the reconciliation window is $0.00 you can tell QuickBooks to “Reconcile Now” and after a moment of processing it will congratulate you on completing a successful reconciliation and give you the option to print out a summary report, a detailed report, or both. I like to print the report and store it with my bank statement; however you can always print a copy from the Reports, Banking menu. Just select previous reconciliation report and follow on-screen instructions. This is a handy tool should any transactions that were previously cleared be deleted or altered…use this archived report to find discrepancies.

If you have questions about reconciling your accounts in QuickBooks, drop me a line at www.quickbooksgal.com.


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Comng Soon: Starting a New Business - Checklist & Discussion

Upcoming:
• Payroll – Ugh! I have a business with employees– now who wants a piece of me? (Social Security, Medicare, State Unemployment, FUTA, who else?)
• Using Credit Cards to pay bills, make purchases
• Converting Peachtree to QuickBooks
• Creating a new file in QuickBooks from an old one (Import lists vs. deleting transactions)
• Recording cash purchases and owner purchases/contributions
• QuickBooks Point of Sale – What’s new in 2007
• Links to our new MicroPods – podcasts devoted to Microsoft and the new Office Accounting - yes, we really are working on them! Coming Soon!



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Well, that’s it for now. I appreciate your time and hope you will join us again next time for another in our Quicklet© series. If there are topics you would like me to cover, send me an email at jayne@quickbooksgal.com. I welcome your ideas, questions, and comments.

Don’t forget to visit our website, www.quickbooksgal.com to learn more about me, the services we offer and our workshops. April classes are on the website now.

I’m Jayne Miller, The QuickBooks Gal. Thanks for listening.






Jayne Miller is the owner of Custom Business Solutions, a consulting firm in Reno, Nevada that specializes in providing bookkeeping and software support.