 QuickBooks Online 2024 bank reconciliation month number two checks and other account decreases. Get ready and some coffee because we're about to go on stage with QuickBooks Online 2024. Here we are in our Get Great Guitars 2024 QuickBooks Online sample company file. We set up in a prior presentation, opening up the major reports like we do every time the reports on the left. We're in the favorites, right clicking on the balance sheet to open link in a new tab, right clicking the profit and loss open in a new tab, right clicking the trustee TB to open in a new tab, then we'll tab to the right, close up the hamburger and change the range. 010124 tab 022924 tab, want to have it on a month by month breakout and then run the report, tabbing to the right, close the hamburger again, change the range again 010124 tab 022924 tab, change it to the months again, refresh it again, tab to the right one more time on the reps of this process, hamburger. First a word from our sponsor. Yeah, actually we're sponsoring ourselves on this one because apparently the merchandisers they don't want to be seen with us but but that's okay whatever because our merchandise is is better than their stupid stuff anyways. Like our Accounting Rocks product line. If you're not crunching cords using Excel, you're doing it wrong. A must have product because the fact as everyone knows of accounting being one of the highest forms of artistic expression means accountants have a requirement, the obligation, a duty to share the tools necessary to properly channel the creative muse and the muse she rarely speaks more clearly than through the beautiful symmetry of spreadsheets. So get the shirt because the creative muse she could use a new pair of shoes. If you would like a commercial free experience consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com closed change the range 010124 tab 022924 tab month by month on the breakout run it. Let's go back to the balance sheet. We're doing the bank reconciliation this time for the second month of operations which should be similar to all months after that first month of operations where we had that kind of beginning balance issue often we have to deal with for the first month. We are at the 9577905 on our books. The bank statement says that we have 101 59005 as of the same date the same cutoff date which we're going to imagine is the end of the month even though it says 28 up here and we're in a leap year but if we go back on over let's go to the first tab and let's go down to the reports down but let's go into our transactions and then I want to go into the reconcile I'm going to close the hamburger and then I'd like to look at the history here to see that last bank reconciliation to have it open and if I right click on the view it won't let me open it in a new tab from here so I'm going to right click on the tab up top to duplicate it and then let's open it from here so we can have this last one open to viewing it so here's the bank reconciliation as of 131 we have the summary up top here's the statement balance the unclear transactions and the register balance as of the first month now we want to look at those differences which were the unclear checks these checks we would expect to be clearing in the the second month in February because they were written in January and they didn't clear in January so we're hoping those clear in February let's see if that is indeed the case let's go back to the first tab back to the reconcile we are continuing or resuming the reconciliation process we shall resume and then up top we have the edit information there was our beginning balance there's the ending balance the beginning balance rolling forward of the 61 241 85 the ending balance what we typed in 101 590 05 as of the cutoff date 229 here is our statement balance that's just what we typed in it needs to match at the end of this process the cleared balance down below is what the cleared balance is consisting of the beginning balance which is good we checked it off the deposits are good 51 981 we checked it off all we have to do is the big part now which are the decreases and the checks remembering that when we're looking at the decreases if we have physical checks then we're going to have the check number possibly to help us out but the dates not going to be as useful given the fact that it there's going to be difference or variation and how long it's going to take for each individuals to cash their check because before the bank knows about the transactions the other person's going to have to receive the check deposit the check and the checks going to have to clear the bank if they were electronic transfers on the other hand then the date would be much more relevant and the check number we wouldn't have but we might have a description in that case which would give us some indication of the vendors so those are just some things to note for the different types of transactions you might be working with so we're always going to be going from the bank statement to the books because everything on the bank statement is going to have to be on our books unless the bank made an error which isn't generally the case if we check everything off on the bank statement to our books then we should get to this number and we should be able to reconcile if there are things on our books that aren't on the bank statement that might not be a problem because those will be the outstanding checks so that's what we're going to do we're going to go from here the 357 270 and let's go back on over here and see if I could find that so I'm in the not all I'm going to go to the payment side I'm going to collapse this and I'm looking for that 357 270 so here it is here's the check number the 1012 so we can see that we actually wrote that that's a payroll check that was written in January so if I looked at my prior bank statement we could see that that was in my unclear transactions and has now cleared this time so that's good that's as to be expected so we're like okay we're good that our employee got their money they're not going to sue us or something here's the 1010 4 4 10 10 10 4 10 okay so that's going to be 4 10 so there it is check number ties out the date notices is a little ways off because it's a check it was in January that we wrote it it cleared in February so we would expect that we could see that in the unclear items for last month which are now clearing this month so that looks good all right done movie B to the end I've got two letters for that B to the end B and so then we're going to say 1013 185640 so 1013 185640 notice the order is different than on on the bank statement why because if you have checks it's likely the order will be different because it's going to be most likely sorted by date and the date's going to be dependent upon when the actual checks cleared which is going to vary because the checks depends on who you give the check to and how long it's going to take for them to clear it then 1015 is 200 so I'm going to go okay 1015 did you also know you well let's go let's just 1015 200 this one I actually entered as an expense instead of a check form but I think that's the one it was also on prior month so there's the 200 here that is clearing in the current period okay and then we'll check that off let's see if we can do two at a time here we've got the 130 1014 and the 1358 for the 1016 so 1014 1016 so here's 1016 1358 and then 1014 where's 1014 don't day I think it's the 130 I couldn't pull off two at a time dang it I'm not good enough I'm not good enough my memory isn't good that's what you get for watching online so much YouTube and stuff anyways I still check them two off so we have that I failed you failed on it do do do do do do okay let's try again 1018 and 1021 1018 and 1021 okay so here's the 1018 360 and 1021 and so there we have that so that's the 360 and the 46877 this is easier if you have it on two screen see I got it that time no problem leveling it up leveling it up all right so these ones I got 1023 is 1856 1023 1856 1023 185670 and then one more on the normal ones here which are 1024 1080 so 1024 1080 okay so now we have all of the normal transactions that have been put in place these two I'm not going to find in our books so if I look over here 520 I'm going to say that we cannot find those I already know this because I made the problem but see we can't find it it's like oh dude I can't find it I'm looking for those and I can't find it what's going on and so now we have to put now we have to upload it ourselves into the system now if you had bank feeds of course you might have these in in the system because then the system would pull it in through the bank feeds and you'd probably know about them and record them as the bank feeds happen these are withdrawal that could happen from like the owner and then the bank charges that would that would be coming through that are going to be charged by uh by the bank that we wouldn't know about until that we get the bank statement and they show us that they charged us or we get the bank feeds so let's we're going to do is we're going to say well we're going to have to add that to our are these an error no it's not an error we're not going to get that back so we're going to add them to our system so let's go ahead and save it for later and then we're going to go into our our transactions into the chart of accounts let's just throw this into the chart of accounts into the checking view the register and then I'm just going to add a couple items here we will go into just using an expense form to do so as of the end of the month I'm just going to say 022924 and it's going to be the the we're going to pay the bank which I just called like chase let's say chase vendor because it's an outflow bank charges was 15 last time this time it's $20 so we're going to say $20 bank charges and so that's going to go into an expense account have an impact on the income statement of the $20 and it will decrease the checking account let's save it and then the other one is money that was pulled out by the owner so we're going to say this one went to the owner as a vendor we're going to say for for a draw now this one was for $500 so 500 now last time we put the draw to miscellaneous expense so we're going to revisit this this issue this problem that when we see something that the owner drew out our normal thing is whether it be us or someone else as a bookkeeper it's even more difficult because because we don't know what actually happened even if you did it yourself though you might know not know what actually happened if you pulled $5,500 out of the ATM then what did you spend it on is the question and can you prove what you spend it on in the event of an audit if you had tax questions about it so so quick recap remember that that when we look at our income statement over here the and we think about it for taxes for taxes everything is flipped on its head meaning the expenses are good those are called deductions and the income is bad because we're going to have to pay taxes on the income so so what we want to do then is make sure that we have an audit trail for any legitimate expense in the event that the government comes back and says what did this money come from and we can show them the audit trail so that would mean that that what we would like to to train ourselves or our clients to do to make things as smooth as possible say if it's a business expense you want to pay it with a credit card or an electronic transfer or a check so we have an audit trail if it is a personal draw then then you draw out the money so that we on the bookkeeping side can say okay if money was drawn out it's going to be for personal use meaning it's going to go on the balance sheet decreasing the cash and the other side is going to go into somewhere in the equity section typically in another account that we're going to call draws or something like that which would be similar to dividends if it was a corporation although for a corporation it's a little bit more tricky because with a corporation the dividends have to be uniform across all the shares which is not the case for a sole proprietor or even a partnership in which case you can draw out money more or less in accordance with the partnership or agreement or when you have the cash flow for a sole proprietorship so that's what we want to do so this time we're going to say it's a draw if it's a draw it's not going to hit the income statement and if it's an expense it will hit the income statement if it were an expense we would we would also want to see if they can give us some documentation of what the money was spent on so bottom line is uh don't spend cash for business expenses if you can help it sometimes cash is keying it goes a little bit further some people like getting paid in cash so if you have to you have to but you want to want to save the documentation then so let's go into here and say if i can find an equity account that QuickBooks has given us for draws this time so here's all the equity accounts that they have given us so this is uh owner's equity did they give us here we go owner's draw it's an equity account that's the one we want so let's go ahead and save this this decreases the checking account and puts it into the equity of draws let's go on over to the balance sheet and then run the balance sheet okay so we had an adjustment then to the checking account here and we have an adjustment to the draws and you can see the draws are now on the books as a negative five hundred dollars because it's a contra asset account so remember the accounting equation here is assets equal liabilities plus equity or assets minus liabilities equals equity or you can think of it as assets being what the company has liabilities and equity represented who has claim to those assets well if you see the equity as our claim as the owner to the assets of the business then if we drew money out then we're lowering that amount right because we paid ourselves kind of like paying off the loan to a third party liability therefore you can call it basically a contra liability account because it's going to be you know bringing down the full liability balance also just note that these two accounts the investment account and the draws account will typically in normal bookkeeping like a textbook format every month or every year would roll into the equity which is equivalent to retained earnings but in QuickBooks what happens is net income gets closed out automatically on a yearly basis QuickBooks does not automatically close out on a yearly basis draws and investments so if you want to close those out on a yearly basis you would have to do a journal entry to manually close them out now you don't have to do that if you don't do that then these are just going to show the the draws and the investments over the life of the business rather than just simply for the current year of the business which is fine that's not that's not a big deal but just something to be aware of so that's going to be the general idea there so let's go back then and then on the income statement we recorded if I if I run this we've got our bank fees now where do they put the bank fees here so now we have another $20 on the bank fees for February so it's 15 and January 20 for February all right let's go back to the first tab and then open up the hand boogie and we're going to go down to the transactions uh not yeah that's right and then I'm going to go into the reconcile and let's resume resume reconciliation and so now we have these two that are at the end of the month these two expenses there's the 500 there's the 20 and so I'm still out of balance by the 179 K. Paso so if this happens then I have to go through each of these and say okay what is off here so I've got I've I've seen that this this uh 10 18 I tied that out with the check number here on 10 18 but the dollar amount is different so here's 360 so something got messed up with the checks that got paid out it got paid out in reverse order that can happen sometimes so so it seems to me of course that this 180 is what should have been checked off and not this 360 so I'm going to uncheck the 360 and say that's what it looks right so now we have the 180 checked off now we're also still have a difference of two cents and again I would like to get it down to be perfect because even if I make an adjustment for that two cents then that's going to lower the amount of my my assurance due to the fact that that that that two cents could be a result of multiple deposits and multiple checks so I'd like to know exactly kind of what that is so I can go through each of these again and say okay there's the the 3572 and I can I could say okay here's the 3572 let's go back on over here so did you do 3572 69 versus 3572 70 so there's there's part of the problem here and it's these payroll checks and part of the reason it happened with the payroll checks is because is because we were trying to use the payroll system and and it had the calculations for the socials for the socials the california taxes kind of messed us up a little bit so we had some rounding differences between our practice problem here and what was in the books so typically if that was the case in practice I would go into the actual check and basically change the check however these are payroll checks so I don't want to actually go through that I just want to note that that is what the difference is and next time I'll actually show you what will happen if we force this adjustment of the two cents which isn't something I recommend doing in practice I'd recommend you know fixing it because the in practice the idea would be that the bank statement is correct right the bank statement is right unless the bank statement is wrong you know which it usually isn't if that's what actually came out of the bank then you would want to make some correction on your side so we might then if I didn't want to correct that payroll you know I might make another journal entry myself to show the difference so I can actually input exactly what the difference is and why the difference is there or something like that but I'd like to to show you what would happen if I just post that two cents so in a following presentation when we wrap this up and look at the reports we'll just basically close well we'll finish it we'll finish now and QuickBooks will most likely give us an error saying hey look you still you're you're off and then you'll say well I want you to make the adjustment so that's what we'll look at next time so we have made a change to our financials so let's let's leave here I'm going to save this for later and then let's go into the and by the way did I check them off here these two are checked off now as having been done so that's good and so this one is basically done it's it's off by two cents so our ending balance is good to go so let's take a look at our trial balance now to see where we stand running it and that's not my trial balance here's my trial balance so this is where we stand we made an adjustment to the checking account for those two amounts that were on the bank statement that were not on the books and we made the other side of that adjustment went to the draws account in part for one of the transactions and then to the bank the bank charges for the other transaction that was that we had to add and that's where we stand at this point in time we'll see if we can wrap this thing up next time