 QuickBooks Desktop 2023, credit card reconciliation month one. Let's do it within two weeks. QuickBooks Desktop 2023. Support Accounting Instruction by clicking the link below, giving you a free month membership to all of the content on our website, broken out by category, further broken out by course. Each course then organized in a logical, reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files, and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. Here we are in QuickBooks Desktop Bank Feed Practice file. We started up in a prior presentation going through the setup process we do every time. In the view dropdown, we've got the hide icon bar, open windows list checked off, the open windows there open on the left. Reports drop down company financial we want to open up that profit and loss standard report change the range 010122 to 123122. I'm going to customize it now so we can go to the fonts to numbers and change them up to 14. Okay, yes, and okay, then reports again company financial this time the balance sheet standard. Customizing the report to change the range 010122 to 123122 and then fonts to the numbers need to change up to 14. Okay, yes, and okay, now we're going to open the bank feeds reports drop down. I'm sorry, banking drop down, I should say bank feeds. We're looking bank feed center. Let's open that up. We've got the two items the checking and the credit card the credit card, the one we've been working on lately, and we've entered the transactions from the bank. Now we're going to do the bank reconciliation process note that oftentimes when people think about a bank reconciliation we often think about the checking account. But we also have the same kind of concept with the credit card, although the credit card is typically going to be easier because most people are not using a full service accounting system for the credit card, but instead waiting till everything clears the bank and then just entering the transactions from the bank feed. However, with the first transactions, it could still be a little bit problematic, a little bit confusing. So note that what happens if I go over to the homepage remember that when we're talking about the normal bank feed process or the normal bank reconciliation for a checking account, a full service accounting system would be entering the transactions on our side, ultimately entering ending with checks decreases to the checking account and deposits increases to the checking account. So we're looking at checking account at this point. And if it was a full service accounting system, then we would double check what we entered in our system to what had cleared the bank. We can do that in part with the bank feeds which can match to what we have entered into our system and or with the bank reconciliation which will tie out the ending balance to what's in QuickBooks. But if we're talking about the checking account and certain types of businesses such as gig work if you can impede from like a platform like YouTube or something, then you can depend on the bank to build your financial statements, which isn't really a full service system that instead is basically constructing our accounting from the bank statement making our financial statements balance sheet and income statement from the bank statement. So in that case, we wait till something clears the bank and then we build our system from the bank feeds that will make the bank reconciliation quite easy because we won't have things like outstanding checks and deposits and are less likely to have differences because we built our system from the bank. When we're talking about the credit card, usually most people will be building their credit card transactions or entering them from say the bank feeds or directly from the credit card statement, because the credit cards usually lend themselves to that kind of transaction. They're similar to like a check an electronic transfer transaction from the checking account. And therefore they're going to clear the bank fairly quickly. We don't have to deal with the outstanding checks and they're going to have the information in the bank feed typically with a memo that helps us with the vendor situation. So, however, if I go back to the balance sheet, note if I go down here to the to the credit card, the balance might not be matching out because of the beginning balance. We still have to deal with the fact that if I had a balance outstanding before I entered the new transactions into the system, then I'm not going to line up with that beginning balance. So, for example, let's change this range and bring it to 0831 22 and imagine that I'm going to be matching this balance here to what is on my credit card statement. So my credit card statement as of that date has 66531 we're going to imagine, but here we have a negative 33487. So obviously this doesn't look right. How can it be wrong when I constructed my books from the bank feeds? Well, that's going to be because we don't have this beginning balance to 1000 in there. If I take my trustee calculator here and we say okay trustee calculator, you're in the wrong screen calculator. And we take the 665.13 minus then the what we have to add it in this case because it's a negative 33487, then we get to the 1000. So I got to enter that beginning balance into the system. So let's see that in the bank reconciliation before I enter it. We can also come to that conclusion by going okay let's go to my my banking drop down and we're going to reconcile. I'm going to reconcile the credit card account instead of the checking account. And then I'm going to do it as of the bank statement date. Now note that if you're working real time, then you'd like to reconcile each month. The reconciliation each month will help you to verify that you've got all the transactions in the system properly and that you don't have duplicate transactions. It's not going to really account for outstanding items because unless you're doing a full service accounting system, meaning entering the transactions in the credit card as you make them not waiting till they clear the bank, you shouldn't have those kind of differences because you're depending on the bank to enter the transactions. Here's the problem we've got a zero in the beginning balance and over here we've got a thousand in the beginning balance. Now you could try to fix this by if I close this out for example, and I go to my my lists and my chart of accounts. When we set up the credit card, I could have said credit card here and right click and edit. Let's edit it. Sometimes it has an opening balance there and you can enter the opening balance. And that could be a useful tool, but QuickBooks is still going to enter a journal entry when you enter the opening balance. And it puts the other side typically either to like an uncategorized expense account or into opening balance equity. So sometimes I like to just actually enter it myself so I can understand the full transaction that I'm going to be putting in place. Otherwise, it's going to force a transaction here and I might not know exactly what that is. I got to then figure out what QuickBooks did. So I'm going to say let's close this out and say okay, I'll enter that transaction in a second. Let's go to the banking drop down and go to the reconcile credit card banking reconcile and let's continue on here. And let's say, well, what if I just continue on and say 0831 22 I know the ending balance needs to be 66513. Let's put that in 665.13. Now if there's charges, I can enter the charges here. But oftentimes the charges will be included because if you got them from the bank feeds, they'll be in the system. And even if they're not, I like to add the charges by comparing them out and then adding them later. I'm going to keep that as is. I'm going to say continue. And then I'd like to hide everything after the financial statement date. If you're entering multiple bank reconciliations, this is quite useful because if you were to enter the transactions first, then there's no way it could have cleared the bank after you enter the transactions. And if you're just getting the information from the bank, then the dates are going to be applicable here. So I can hide everything after the month I'm working in, which makes it a lot easier to work with. Now if we enter this directly with the bank feeds, sometimes you'll notice when we saw the balance sheet items here and we went into the credit card detail, you got this little lightning bolt, which indicates that we verified it with the bank feeds. So you would think then that sometimes if you go directly into your reconciliation, it might have them all checked off automatically because you already verified them, but you could check them all off by just selecting mark all down below and that'll check everything off. Now normally, this might be all you have to do to record the transactions given the fact that you don't have the beginning balance issue because all of the transactions came from the bank, you're not going to have any outstanding checks or deposits. But in this case, that puts us out of balance, of course, by the beginning balance, the $1,000 that we have to start off with. Now if you did do a full service accounting system, you would want to check everything off to see if there's any outstanding transactions in the system, so you'd have to go OK. I see the, let's make these first, the 7121, the 7121, I would check these both off. There they have been found. If there were something here on our books that were not on the bank statement and in the credit card statement and I was doing a full service accounting system, it's possible that I entered the transaction on our book and it had not yet cleared the bank, even though it was an electronic transfer. But the electronic transfer, because it's a credit card, should still happen within like three days. So it's very less likely that you're going to have an outstanding item, even if you're doing a full service accounting system due to the fact that you're not dealing with checks, which take longer to clear. And then on the other side, we've got this item, so that's the 47729, that's going to be here. And so now we've got kind of a recap of our bank statement, except that the zero balance up here is wrong. We've got the payments, we've got the charges, which we're seeing here on our mock bank statement. So now I've just got to enter that beginning balance in order to make things work. So how am I going to do that? I can go into my register, so I can go to, I like going this way, the chart of accounts. I can go into my credit card register by double clicking on it. And so we're in the register now. So what I want to do is enter that thousand dollars as of the period before the start date. Now note, when you're entering data into QuickBooks, you probably want to enter it for a full year. So if you don't really want to start in the middle of the year, if you had a prior accounting system, unless it's a new company that is starting in the middle of the year. If you're just moving accounting systems, you'd like to start it in January if you have a calendar year. So you have a full year's worth of data in the current system. And any beginning balances, then I would have the best practice of entering them as of December of the prior period to give a full indication that this is the balance before the time frame started. And instead of hitting an income statement account, I'm going to hit an equity account with it so that it doesn't hit the income statement. So for example, I'm going to put this in as of 123121, which again, I know is kind of funny because I started entering data in August. So you might imagine I entered it in as of the end of September or the end of July. So I can say then the charge is going to be a payment that we're going to have. I'm sorry, it's going to be a charge of $1,000 increase in the liability. And then the other side, where's it going to go? Well, note that these charges are things that happened prior to this current accounting system. So what I'm going to do is put them directly into the equity account. I'm not going to go in and realist basically the charges and hit the income statement with it. If we had a beginning balance issues, if I'm pulling over this data from a prior system, we have another course that you can kind of look into and get into how to set up those beginning balances in a bit more detail, but I'm going to put the other side to equity. So I'm going to go in here. I'm going to say it's going to go into equity. I'm going to put it into owner's equity. Notice that if you use the beginning balance thing, you would probably put it meaning if you went into the account and put in the opening balance of $1,000, QuickBooks would probably dump it into opening balance equity, which isn't really a professional account. That's like an account that's saying, hey, QuickBooks did something funny. And then you'd probably want to transfer it from there to the equity account. So I'm just going to put it to the equity account directly. It's not going to hit the income statement. I'll call it beginning credit card balance tab. And then it says, this is saying, I'm just paraphrasing that you don't normally hit the account that's like retained earnings type of account. The one that rules the income statement into it, unless you have a reason to do it such as setting up the beginning balances. So I'm going to say that's okay. I know. And then I'll close this back out, close this out. So now that that item is right here. It's still not up top in the beginning balance, but it's something that I can check off. So therefore I've verified everything in the same way. This one I had to include in the payments area. But as long as I note that on the first transaction, I've tied everything out and the ending balance has to tie out. We don't have any outstanding items. We have no difference now in what's on our books to what's on the on the financial statements due to the fact that we're creating the accounts from the bank. So we don't have the timing differences. So I can reconcile now because this is at zero. So I have no problem if this is not at zero and I try to reconcile quick books will force a transaction to be in balance. We don't typically want to do that because then we're losing a huge piece of the internal control. It should be fairly easy to get this to reconcile, especially after the first month after the first month. Then we should be able to just go in here and just mark everything off and everything should be rolling fine because again we got the data directly from the bank. So I'm going to go ahead and reconcile it. And then the outstanding balance of this account is to pay all so now it's asking me do I want to pay this balance at this point in time. And I don't want to pay it at this point in time because I'm paying it through the bank feeds. I've already paid them so I'm not actually writing a physical check at this time to pay it off. So I'm going to cancel that. And so there we have it. And so now we've got our reconciliations and so I can see the bank reconciliations opening them up. They're not going to be that interesting. And I'm going to because we built this from the financial statements are going to make this a little bit larger. Note that the bank reconciliations are different than other reports. So so they're in this format when you first open them and then when you open them again they might be in a PDF. You also are not going to be easily able to go to prior bank reconciliations. So if you want the bank reconciliation data you want to print it out. And typically you want to print out the detailed report rather than this one being the summary report because if there are any differences you want to know what those are. So here's the cleared balance right now. This is basically just recapping what is on the financial what is on the actual bank statement except it's kind of messed up here because these two are combined together. As as you can see that's our beginning balance kind of issue. But there we get to the ending balance and this then is going to show you the differences between the cleared balance and the register. Now there are no differences again because we don't have any outstanding checks or deposits because we built our financial statements from the transactions in the bank feeds. And that's something that's often done on the credit cards. So there's not really much activity. The difference between these two is what you typically want in a reconciliation. In this case there's nothing really to reconcile. If I go back on over here this number now matches what's on the ending balance of of the statement of the credit card statement. So there is no difference. So why do the bank reconciliation. You still want to do the bank reconciliation because it gives you just another double check that you didn't enter anything twice and that you didn't that you didn't omit any any transaction as well. So it's still a good habit to do. Although it doesn't give you the same kind of verification as it would if you entered every transaction into the system as you made the credit card transactions and then double check them to the credit card. In that case you might then have some outstanding transactions. So I'm going to close this back out and then the full detailed report would be the same thing except you know you got all the clear transactions. These are just mimicking what was on the bank statement up top. So those these are the three transactions which isn't really necessary. It's redundant but you have that there and then here's the cleared balance. And again there's no difference between those two. Then you have the new stuff which is not really necessary on a bank reconciliation but QuickBooks adds it. If I close this back out just note that if I close this out and I go back into the reports into the to the accounting of the banking reports and the previous reconciliation then it's going to open it up a little bit differently. I believe I'll go into this one. So it opens it up with this like PDF format. So just note that these are different than normal or other reports. If there was a difference and you wanted to save these reports you want to print them out and save them because it will be more difficult to get into prior bank reconciliation reports. Because if you were to delete these transactions for example in QuickBooks then the bank reconciliation will be messed up. So QuickBooks can't really just modify whatever you do into the system and fix the bank reconciliation because the whole point of the bank reconciliation is to tie out what you did to what was on the bank statement. And so what you want to do is close out the month and not do anything to the prior month because you could mess up the bank reconciliation. And that's why you can't just go into the prior bank. You want to have the static copy. If there is a problem then you can pull out the static copy of your bank reconciliation and compare it to what's currently in the system and see if anything was deleted or what happened in a prior period and kind of fix it from there. But that's the general idea on the bank recs. So we haven't entered anything new here. So the financial statements should be remaining the same but actually no we did. We entered that $1,000. But now going forward the bank reconciliation process will do one more just to show it should be quite easy going forward.