 QuickBooks Online 2023. Bank reconciliation month number one. Checks and cash decreases. Get ready to start moving on up with QuickBooks Online 2023. Here we are in our Get Great Guitars practice file. We started up in a prior presentation using the 30-day free trial. We also have opened the free QuickBooks Online sample company. If you want the to open at the same time, we suggest using the incognito window or another browser. You can open incognito if using Google Chrome by selecting the three dots in the browser. Incognito window type in into the search engine. QuickBooks Online Test Drive. Support Accounting Instruction by clicking the link below giving you a free month membership to all of the content on our website. QuickBooks Online 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. We're using the sample company to compare the accounting view of the one Get Great Guitars is in and the business view, the one the sample company is in. You can change between the two views by selecting the cog up top and switch the view down below. We're going to duplicate some tabs like we do every time. Right click on the tab up top to duplicate it. And then right click the tab up top to duplicate it as the tab to the rights thinking. We're going to go to the tab in the middle, the reports on the left. Those major financial statements, those favorite reports, we're going to open those. If you don't have that as your favorite report, the balance sheet that is, then there's something wrong with you as everybody's favorite. It's everybody's favorite. By the way, the reports in the sample company are in the business view and the business overview. And then the reports on the left hand side. We're then going to go to the tab to the right. We're going to go then to the reports on the left and open up the income statement, the profit and loss, the other favorite financial close up the hamburger and change that range. We're going from 010123 to 022823. We'll hit the drop down. We're going to hit that drop down and then months. We want to see a month by month run it. So there's Jan. There's Feb. There's the total. We're going to tab to the middle. Do the same thing with a burger. Close in it. Get that burger out of my face. It's making me hungry. We're going to go from 010123 to 022823 and then hit the total drop down. We're going to see the month by month breakout again. Run it. That's where we stand. We're doing the reconciliation as of the end of January. So here is the cash account. That's where our focus is. We've got our bank statement over here. And so we have a difference between the register balance and what is on our books. So we're going to have to do some reconciliation. That's what we're doing at this point in time. Let's go to the tab to the left. We've started our reconciliation process and you can find that reconciliation process by going down to the left. Accounting on the left hand side. Reconcile. If you're in the business view, by the way, where is it in the business view? You may say, I'll check it out. It's over here under the bookkeeping. It's under the bookkeeping. And so if I hit that and then reconcile right there, that's it. So now we've started this. We're going to reconcile the checking account as we've discussed before. We're going to resume. Continue on. Proceed. Por favor. We're going to go close up these little note things. Don't show me this again. That's what I want to tell it. Do not pop up again. All right then. And then we go to the edit. If we go to the edit info, we entered our beginning balance was 25,000. You'll recall that that doesn't exactly tie out here. That's our beginning balance problem. We'll deal with that in a bit. We've got the ending balance 61,241,85, which is our statement balance as of 131,23. That's our information. We've got the recap up top. This is the statement balance on our financial statement. And this is the cleared balance, which as after we're done, these two should match, meaning there'll be a difference of zero on the right. So how are we going to do that? The summary is up top, just like the summary is up top here in our statement. The beginning balance is not exactly right, but we're going to fix that later. 143,70,85 is right, right there. So we're good on that one. And so we just got to enter the payment side of things. And then once we fix everything, there should be a balance of zero as the difference, which means we'll know that we're good to go. It does not mean that we'll have everything checked off down here, because the things that are not checked off will then be the reconciling items in our bank reconciliation, the difference between the register balance and the statement balance. Okay, so let's go back on over. We're looking at the payment side. So we did deposits last time. We checked everything off, except this one that was in our books, but not on the bank statement. We're saying that that's going to be a reconciling item. Let's do the same thing on the payment side of things. We'll just select the payment side. I've got the cog dropdown so that I'm on the regular view, so I could see a few more of them at one time. Remembering that on the payment side, this is usually going to be the longest and most tedious kind of format of the bank reconciliation. So let's just recap what we might see on our bank statement. There's a couple types of ways you can make payments. You can make them with checks or you can make them with electronic transfers. So if you make a payment with a check, then that's going out of fashion these days, I'm aware, but many people still use the good old check. If that's the case, it's more likely that you're going to enter the check and you're going to want to do the full kind of system. You enter the check and then it's going to clear the bank. You're not going to wait until the check clears the bank and record it with the bank feeds. In other words, because you want to see these outstanding items. You want to be determining whether you wrote the check and whether the check was deposited. And this is kind of how you would do that. So that means if we wrote a check, the date is not as relevant a factor for us to help us determine the proper thing to be checking off because the date that we wrote it may be way earlier than when it was deposited. We will have a check number, however, which does help us. That's an added kind of feel that's useful when we write the checks. And of course, the amount will be relevant. That should tie out in our books to what's on the bank statement. If we have electronic transfers then then the date will be much more relevant. Similar to a deposit because the transfer should go through pretty quickly. We also are more likely if we're using electronic transfers to wait till it clears the bank before we record it. In other words, use bank feeds to record the transactions. If we record the transaction with bank feeds, then everything should tie out exactly because we constructed our books from what's on, in essence, the bank statement because we got the same information from the bank feeds. So that's becoming more and more likely for small businesses to do on the payment side of things. So oftentimes it's going to be an easier thing to check off. Even if you enter the data first and then you're checking it to the bank with like a bank feed, I mean with like an electronic transfer, the date will be relevant then. And you might have then more information in the memo section, which often gives you information that can indicate who the vendor is. Notice that when you enter transactions into the system with bank feeds, the memo might tell you who the vendor is, but you still have to add them as a vendor in order to show that otherwise it's just a memo. So that's something to just kind of be aware of and then of course the date. So we're going to do the same thing. Remember that we're going to be always checking from the bank statement to the reconciliation to QuickBooks. We're not going the other way. We could start to go the other way after a while once we start thinking the process in our head, but you get kind of confused if you're going both sides. If you always go from the bank statement over to our books, then whatever's on the bank statement has to be on our books. It's not true reversed. If it's on our books, it's not necessarily on the bank statement because those things that we don't check off will be the ones on our books that aren't on the bank statements because they haven't cleared. Those will be the outstanding items. Those will be the items in our bank reconciliation giving us the legitimate difference between the book balance and the bank balance. Okay, given that, we'll just go through this and check them off one at a time, one at a time. So I've got the 12,000 here and I've got the check number 1001. So hopefully my check numbers match up if I didn't mess up the practice problem. But so this one, I've got 12,017. So this one, I entered with an expense form instead of a check form. So I'm going to check it off anyways. So I had a little bit of a different terms of the form that was used. There's the 12,000. I'm going to say, okay, that one is good to go. Notice that the date should always be, you would think here before the date that it cleared. The date on our books should always be before the date that's on the bank statement because in theory, the bank doesn't know what happened. They can't tell the future. We have to do it first and then they can tell us, right? They can't go the other way around. Okay, now these two, we're not going to find on our statement here. So now we have two items that are on the bank statement that's not on our books. Now, whenever that happens, we're going to have to say, okay, is the bank statement wrong? If it's wrong, then I'm going to have to go through and say, well, they charged me something I shouldn't be charged for. And that's how we find out those types of things. And then we can try to reverse it. We'll still probably have to add it and then reverse it in the future or something like that when they fix it because we'll have to fix it in the future. But the other question is the other option would be, well, they're right. And if they're right, then I have to add those to my books. So in this case, this is one of those beginning balance or the first bank reconciliation problems because these are items that if I look into it because this is my first bank rec. And if I looked at the prior year bank rec, I would see that we were out of balance by 5,000, which coincidentally is the beginning balance difference. Remember, the beginning balance is on the books at 25,000, whereas here it says 30,000. Why? Because these two items were in the book's last period that were unclear. Those were the timing differences last time, which are now clearing. So then I'm going to have to check those off. So that's that beginning balance or first bank reconciliation issue. We're going to get back to that in a different section. So I'm going to skip those for now. And that's a problem that we're pointing out through the bank reconciliation and we'll have to address it later. So I'm going to say, okay, I get that, but we're going to come back to that later. This one, the 16,000, let's find that. 16 is right there. Boom. Date 19 here. Date here is 112. All right, let's make that green. 7,000 on 1003. So 7,000. So these three I didn't enter with a check form. Those were the beginning balance things, I think. But I'll just check off the amount. So I thought that looks like it's correct, correct. And so this one's five, six, eight, nine, two with the check number 1005. So we've got this one. I had to skip one. It might not be in the same order because when the data comes into here, we usually sort by date. And your bank statement might sort the transactions by date or by check number, most likely by date these days. But the dates might differ because their dates are not the same as our dates. So we're going to have to bounce around a little bit when we're tying these things out, especially if you have checks that are involved. So I'm going to make that one green. We got 72, 1006. So we got 1006, 72. There's the check number. Okay, that is good. Let's see if I can do like two at a time this time. We've got 1004, 3780, 1007, 12,000. 1004, 3780, and 1007, 12,000. I almost did two at a time. I couldn't quite do it. My head's not that good, but it can do small things. Good. So now we got 1009, 620, 1009, 620. Boom. And then finally, lastly, before we get on to the other issues, 111,000, 15,000. So there's the 15,000 skipping to the 111. Boom. Boom. Shaka locker. Boom. Shaka locker. Okay. So we've entered all that. Now we've got these two down here, and these are going to be those types of things that now I'm going to say these are on the bank statement, and I don't see them on our books. I don't see those over here on our books because I didn't enter these withdrawals. Maybe I took a cash withdrawal from the bank and maybe I had the bank service charges that aren't included. Remember that if you had bank feeds, these probably would flow through. You would have seen them and you would have added them as they go. But if you don't have bank feeds, then you'd have to add these. In other words, it's on the bank statement. It's not on our books. So we're going to have to add them to our books unless the bank is wrong. I don't think the bank is wrong. So we're going to have to fix our books. So I'm going to go back on over and say, okay, let's save this for later. Save it for later. And then it's like putting the gum on the bed post so you can chew it some more in the morning. And then we're going to go down to and add these to the check register. So we're going to go into the accounting again and then a chart of accounts. If you're in the other view, the business view, we would go into the bookkeeping and the chart of accounts. And I'm going to enter these directly into the check register for cash because I think that's the easiest thing to do. So we're in the chart of accounts, closing the hand buggy. And I'm just going to go into the register here and add these two items. Okay, so I'm just going to add these as like expense forms. So I'm just going to hit the dropdown and say, okay, I got to add these in there because they charged me for these and there's nothing I can do about it. So I'm going to put them in there as of 022823. And let's say this first one, what do we have? We've got a withdrawal. So we took cash out of the business or the owner did. Now, there's some issues with this. I could just put it like owner, you might say owner withdrawal, maybe. And then I'm going to add that as a vendor, even though it's not really a vendor. It's an owner, but are only two options or a vendor or owner. So I'm going to say that. And then another customer, let's put owner, period, save it. And then I'm going to say that the memo is going to be a draw cash draw. The payment is I'm going to put for 150. Now, there's a couple of issues with with the draws because you might say if you drew the money out, we would like to be able to say from the bookkeeping standpoint that anytime you take out cash that you took it out for personal use in which case it would just be a draw for personal use. But sometimes people take cash out and they use it for the business. And so if they took cash out and they bought stuff with it, then that gets a little bit tricky because we don't have the audit trail. And remember, and so we're going to have to want to have receipts and stuff. So for example, if you, if you took money out and then you paid someone in cash or for something in cash for the business, then I'm, we on the bookkeeping side have to figure out and that might be you doing your own bookkeeping or you might be doing bookkeeping for someone else are going to have to determine without any kind of audit trail once that hits the bank where the cash went and allocate it to the proper category. So from a bookkeeping standpoint, even if you're doing your own bookkeeping, but particularly if you're doing bookkeeping for someone else, we would like to have a method of not doing that, right? If you, if you have a legitimate expense, especially with the United States having an income tax kind of system, expenses are usually good for taxes. They're deductions. So we would like to have well documented expenses so that we can say, Hey, look, those were legitimate, you know, deductions. If you're paying with cash, then we're going to have to add things possibly like receipts or things like that so that we have the paper trail rather than just having the thing coming electronically out of your checking account or credit card account or having a physical check that we can kind of use as support for the actual payment. So, so let's see what the difference is between the two methods. Now, in the first month, we're going to assume that they that they actually spent it on something for, for an expense, meaning the check, the cash account is going to go down. The other side is going to be in expense and I'll just put it into like miscellaneous expense over here. And so that's going to have an impact on the financial statements. If it was for personal use, on the other hand, then what it should happen is it should go to the equity account, not having an impact on the income statement. And that's the key difference because it's going to the personal to the owner. It's drawing out like the equity, which represents the owner's claim to the, to the assets. So that's the difference. We'll show the difference between the two. We'll start off making it go to an income account. By the way, you have a similar issue like if the, if the company is using their business account for personal purchases, like they, they, they put on the business account, checking account, a trip to Disneyland or something. Well, now you have an issue we would have liked. It would be easier if they took the money out, put it into their personal checking account and then spent it on Disneyland. But if we see money that's going to something that's for personal use, we could just assign that when we record it as a, as a, as a draw as opposed to an expense. When it, when they pay Disneyland, we're not going to say it's Disneyland expense or trip expense or anything like that. Instead, we're going to say they pay Disneyland and we'll record it as a draw on the other side. So it doesn't hit the income statement. Same kind of thing. All right. So we're going to go over here and say, let's say this goes into miscellaneous, miscellaneous. So they've got other miscellaneous. It's going to show up on the bottom of the income statement. So I'm going to say, okay, let's do that and then save it. So we've done something to the income statement. Now we've made a change. So if I go to the balance sheet, we've adjusted our cash account to more align with what is on the checking account because they had a transaction that we believe is correct. So if I go into there, we had all this stuff happened on actually, I'm on January. I want to go to the FEB statement info. So if I go down here, we've got that 150. The other side should be on the income statement, the P and the L, the profit and the loss and run it to refresh it. It's down here. They put it into the other category, which I might change, but because I don't, I mean, I wouldn't put miscellaneous into other generally just because we haven't categorized it doesn't mean it's not a normal business expense to me. But it's down there. We might change that. All right. And then we're going to do the same thing for the 15 bank charges. So the bank charged us money, which we saw in the bank statement. So I'm going to say, okay, the bank, I won't even put a payee. I'm just going to say bank charge. And then it's $15. And then it should go into something like service charge service charge. There's one. So they got under services, bank fees and service charges. All right. Let's use that account. So we're using the same kind of concept. If QuickBooks has an account that seems applicable, we'll use that one. If I don't like the name or the fact that it's a sub-account, then maybe I'll use it and it'll go in there and adjust the name and make it a non-sub-account. So I'm going to save it and close it. And then once again, if I go up and run the balance sheet, we've actually entered a transaction to the checking account. Of course, not in January, though. Not in January. I did make it in January. I messed up. Hold on. I need to bring that back to January. So let me do that again. Let's do that again. Let's change the dates here. I'm going to change the dates because I'm working in January. What are you thinking? What are you thinking, man? At the end of January. Because this is the January bank statement. January 31st. So I'm going to change that. Sorry about that. Someone's trying to use has been made inactive. Check fields. Okay, I went into the form and then adjust it and let me do it. I'm going to do it to this one here. So this time I'm going to edit it this way so it doesn't give me some weird thing. And I'm just going to check the date from 01.31.23. And let's do it that way. Save it and close it. Okay, so the point is I put them in there as of the end of January because we're doing the January bank right. So if I go back on over to the balance sheet, run it one more time. And I should be able to go into this one. This one here. And then the end of the Jan, we've got the two items are properly input. Okay, that makes sense. I was just, something wasn't jiving. And I like to jive. So let's go back to the one to the right, run it again. And then we've got the miscellaneous in January now. And that makes sense. And the other one went into the bank service charge, which is up here in January. Okay. Okay, doke. Let's go back to the first tab then open up the bank rec once again. And we're going to go down to the bookkeeping or the accounting to do that. And we're going to go into reconcile close up the buggy resume reconciling will zoom wrecking wrecking stuff wrecking the reconcile. So then we've got the those two that we added right here the 15 and the 150 boom bam, boom, bam. So now now we have the payments which add up to the 106 892. So if I pull up the trusty calculator here I can say let's do a trusty calculation with the trusty calculator we're at the 106 829 minus what we have on the bank statement which is here minus the 1118 29. So we're off by 5000 which is that 5000 right here which I couldn't enter because I know those were the cleared items from last time that aren't in the system because that's part of the beginning balance issue. Okay, so now you would think you would think that this would be at zero. So I'm going to kind of I'm going to try to double there's an error here you've probably noticed this by now there's an error here. Let's see if we can figure it out. So first of all the beginning balance up top is 30,000 that's different than our beginning balance by 25,000 right so so they have here 25,000 so there's a difference of 5000 and then the additions are 143 070 and that ties out to the 143 070 85 so that is correct and then the payments we just saw has a difference of 111829 minus the over here the payments are at 106829 so that's another difference of 5000 so you would think that I would be actually netting out to zero here or be off by like 10,000 right so how am I off by 3960 it has to be because the actual cleared balance is incorrect the cleared balance is 6128145 over here I have 26124185 so I did like a dyslexic thing which I am prone to do from time to time but it's out of pure example problem purposes and not because the stupid number was turned around so in any case let's edit that one and say this is going to be this needs to change this needs to 6124185 this is just why we do this just so we can fix these data input errors that people sometimes make when they're not doing it on purpose 6124185 61 241.85 so that should put us back in balance so there now it's at zero so now it's at zero so now you could say well let's just move forward and we could move forward and say well that's the first bank wreck I don't quite get it I don't quite understand because this is wrong and this is wrong but they kind of net each other out so whatever and you could go forward and reconcile and you would be good going forward because the next ending balance will be proper to the beginning balance next time but it's not exactly right if you go forward doing that because and it might not always work because these two items happen to have cleared sometimes these two items might not have cleared in the following period and then you won't have that happy coincidence that it ties out and even if you do it's still kind of an issue because this bank reconciliation doesn't really make sense if you gave it to an auditor if you tried to explain what happened you'd be like yeah the beginning balance was 25,000 even though it's 30 here and then down here we had a difference of the same but the opposite so what we really would like to do is deal with that beginning balance issue so that we have a nice audit trail to see what happened from the prior accounting software which is that we have these two amounts that were outstanding last time meaning they were included in our accounting system but not cleared the bank yet which now have cleared the bank this time and so we'd like to document that so it makes sense and we can see it so we'll do that that's the issue we'll deal with next time before we finalize so don't finish it yet you're going to be tempted to hit that green button and you could it won't be the end of the world or anything but hold your horses hold your horses because the horse needs love too and if your horse looks really tired so just hold give it a hug and then we'll come back and we'll finish it up next time we did make a change to the financial so let's run the trial balance over here and just so we can check it out reports on the left hand side we did make some changes let's do the let's type in the trial balance and let's say this is going to go from 010123 to 022823 I'm going to see side by side months we made some changes to January which of course will adjust the February ending balances as well so you can check either month that you so choose if you tie out to what we're doing I think we're doing things good unless I did a date range issue which I'm a little skeptical of now after kind of doing that but I think we're good I think we're good and so that's where we stand at this point in time