 QuickBooks Online 2024 Bank Reconciliation Month 1 Overview. Get ready and some coffee because we're going to be on top with QuickBooks Online 2024. Here we are in our Geekdrick Guitars 2024 QuickBooks Online Sample Company file we set up in a prior presentation, opening up the major financial statement reports like we do every time. The reports on the left were in the favorites. Right clicking on that balance sheet to open a link in a new tab. Right clicking the profit and loss opening the link in the new tab. And with the trial balance same thing for the trustee TBE tab and to the right closing that hamburger and we will change the range going from 010124 tab 022924 making it month by month broken out and running the report tabbing to the right closing the hamburger and the changing of the ranging will happen again in 010124 tab 022924 and then we're going to say that we want this on a month by month breakout refresh and then tab to the right one more time hamburger close and change that range 010124 tab 022924 tab and then months run it. Okay, let's go back to the balance sheet. Last time we gave an overview of the importance 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 crunchy numbers is my cardio product line. Well, I'm not saying that subscribing to this channel crunching numbers with us will make you thin fit and healthy or anything however it does seem like it works for her just saying so subscribe hit the bell thing and buy some merchandise so you can make the world a better place by sharing your accounting instruction exercise routine if you would like a commercial free experience consider subscribing to our website at accounting instruction dot com or accounting instruction dot think of it dot com of the bank reconciliation process something that every business should do a large small whether you have bank feeds or do not have bank feeds you should be doing part of the bank reconciliation or doing reconciliations it being the second biggest internal control allowing us some assurity that the financial statements are reported correctly second only to the double entry accounting system itself that were forced to use when using the QuickBooks accounting software so now we want to think about the prop the process of doing the bank reconciliation starting with the first month of reconciliation oftentimes having more difficulties than following months that's why we're going to do two months of bank reconciliation we'll talk about some of the difficulties that often come up with the first month of bank reconciliation and then in the second month we'll have a process which will hopefully be a little bit easier representing the normal process then going forward from that time so we note that the reconciliation is basically going to be tying out matching what's on our books we're looking at the cutoff date now at the end of January the first month which our books say is 88 810 27 and we're comparing that to what's on the bank side of things and this is our mock bank reconciliation which typically has the beginning balances the additions subtractions and then the Indian balance the bank says that we have 61 241 85 as of that same point in time the end of January it's not the same number you may may have noticed now that will often be the case if we have a full service accounting system in which case we're putting our books in the system on our side not relying completely on the bank to do so and then using the bank to double check possibly with the help in the use of the bank feeds if we're building our books directly from the bank feeds then it may well be the case that our balance ties at any given time it's to what is on the bank side of things but you can only do that in certain cases so and even then you'd still want to do the reconciliation it would just be really easy in that case so so we're going to say well what is the difference between the two we saw that they're they're hopefully going to be outstanding checks and deposits or things that we have to basically record on our side so in other words we're going to tick and tie everything from the bank to our side if something's on the bank statement but not on our books then the banks probably correct usually is unless the bank made an error in which case we'll have to deal with that but usually the bank is correct we're going to have to add that to our side if something is on our side but not on the books side of things then it might be fine because it might be the case that those are outstanding checks and outstanding deposits which are the reconciling things the difference between the bank balance and the book balance where we were run into a problem with the first reconciliation is often this beginning balance so we have to have a cleared beginning balance that is the same so that we can take everything off as we go and if I go over to our books over here you will recall that we started entering our data as of the end of two thousand and twenty three December two thousand twenty three so if I go into this checking account for example and I was to go into this as of twelve thirty one two four twelve thirty one two three I should say and then and then look at this we put the beginning balance on the books at twenty five thousand dollars we had to do that because when we entered our beginning balances were imagined from the prior accounting system that was on our financial statement as of this point in time so we had to put it on the books at twenty five thousand because we had to reconcile our our debits equally in our credits when we put the beginning balances in place but the bank says that the beginning balance is thirty thousand dollars so that's going to cause a problem with our bank reconciliation possibly because we don't have a starting point that is the same so in other words if I go back on over here let's check that out from a bank rec standpoint go into the first tab and we go into the we could go into the transactions and then here's our bank transactions this is where the bank feeds would flow through bank feeds as we'll look at in future course or section could help us with that with the reconciliation but that isn't the actual reconciliation the reconciliation is over here in this tab and it says match the books to the bank records connect accounts are easier to reconcile so it's obviously advertising the connection to the bank I keep yourself on track find holes in your accounting get things tidy for tax time so let's go ahead and get started so it says reconcile like a pro get your books and your bank statement to agree so you open the bank statement match your books to the statement success alright let's get it done so this was where we would choose the account we're going to be choosing the checking account now here's the problem the beginning balance here doesn't even have anything in it it's at zero at this point in time whereas over here we have a beginning balance of the thirty thousand that's going to cause us a problem we can kind of work around that though so let's continue with that and say okay I'm just going to deal with that hold on a second the ending balance is six one two forty one eighty five so six one two forty one point eight five and by the way six one two eight one if you mess this up you can still change it afterwards once you're in there if I go into this this is going to be as of the cutoff date which is on the bank statement 131 so as of the ending date of the bank statement here and then we're going to say down here enter the service charges or interest earned this is kind of a remnant of the old bank reconciliation before bank feeds because oftentimes what would happen is if we did a full service accounting system we would be entering oftentimes checks right and we would be writing the checks and entering the checks as we go and there would be certain things that we know that we would not have picked up that would be on the bank statement and those things would include things like the service charges the banks can just take money out of our account for their fees we wouldn't know about that until we got the bank statement so we could do the journal entry automatically right here and it'll do a journal entry for us to record the fees are the same might be with interest earned if we earned interest on our account then we would know about that until they told us that on the bank statement so we could record that as we go however these days we actually have bank feeds so so those are things that might come through with the bank feed so we would catch them as they come through our system just like any other transaction and probably record them with the bank feeds making this whole little thing down here obsolete I never liked to use it in the first place because I would rather you know reconcile what I have I think it gets a little confusing when we were adding these so basically I would disregard for those two reasons this bottom bit here usually start reconciling all right then we have our little worksheet up top so we've got the statement Indian balance the statement Indian balance is what we typed in here that was the 61 to 41 85 we just we just told QuickBooks that and then we have the cleared balance the cleared balance is zero at this point in time because it didn't give us any beginning balance and because we haven't checked anything off down below therefore we have a difference of 61 to 41 85 our goal of the bank reconciliation is to get this difference down to zero when the difference is at zero then we can reconcile the fact that this difference is at zero or when it gets to zero does not mean that our books will then match the bank books it does not mean that our books here this 88 810 will then be 61 to 41 85 what's on the bank statement because the cleared balance only represents those items that we checked off down here and if we didn't check it off then it might still be a good a fair thing that we don't check off right because it might be an outstanding check or deposit which would be the reconciling items so this is just the cleared balance the beginning balance plus the things that we checked off the things that we don't check off are the reconciling items the difference between the bank and the book things that were most likely be outstanding checks outstanding deposits now how do we get to this clear balance well it's got your little arrows down here it's the beginning balance which that's going to be a problem because I don't have anything and it has 30,000 so we're that's a problem and then we have the the payments and the deposits which are the things that we're going to check off right so the deposits would increase this number the payments are going to are going to increase this number and so on so if I check all of these these boxes off and I tick and tie each of these items out perfectly then my ending balance has to work meaning my additions and my subtractions that are the cleared balances will tie out to this and this exactly and and so it has to work right if there's something that are in the bank statement that's not on our books then we're gonna have to add it to our books unless the bank is wrong right but we can't do it in the first month because this 30,000 isn't in the beginning balances so even if I get this number and this number to be correct it's still going to be a problem because I don't have the beginning balance well what do I do about that well this 25,000 you will recall is the 25,000 that we put into opening balances that's the beginning balance that we put into the system so that is really truly our beginning balance which should be over here in the beginning balance section but the fact that it's not isn't a big deal as long as we noted on the first bank reconciliation we could just check it off and there it is right there so now basically by doing that I can say okay I have this one I have the top bit but it doesn't tie out right if it matched I wouldn't have a problem if this was 25,000 then I would have the 25,000 right here even though it's not in the beginning balance it's in the wrong category it's still going to be an increase either way and I could still reconcile it's just that I'll end up with with the increases being these additions plus the 25,000 so why is it off by 5,000 though what happened there well if in the prior accounting system I was using a full term accounting system as of the cutoff date of the prior period which would have been if I go into the checking account 1231 of the prior period this beginning balance went in there on let's make the date 1231 to 3 to okay so this 25,000 was in our prior accounting system as of the cutoff date if we had a bank statement as of 1231 23 then the ending balance on that bank statement we would presume would be 30,000 the beginning balance on our current bank statement and that didn't match what's in our books which is quite natural if we're using a normal accounting process because there were outstanding checks and deposits so so now we have these outstanding checks and deposits from the prior accounting system that are messing up our beginning balance that we're trying to start from from one point January 1st of 2024 so what do we do about that well one thing you can do is that if those amounts cleared you'll actually see them in the current time period meaning if there was 5,000 in checks that didn't clear last time they're going to clear in the current month possibly or else they can remain outstanding so for example these two you could see these two amounts right here add up to 5,000 that's the difference so what's gonna happen is these two amounts are actually not in the current activity I'm not gonna find them in the activity and be able to check them off on the payments because I didn't enter them in the current month they were entered in the prior month prior to when we started QuickBooks online in the prior accounting system so so there's a couple ways we can fix that then I could I could just not check them off right I could say okay well if I don't check that off and I just keep this at 25,000 those two amounts will net out right so that if I because this is 30,000 and then there's 5,000 difference down here so if I put it on the books at 25,000 and I don't check these off then I will be able to reconcile exactly that's one method it's not perfect however because that means your reconciliation is kind of messy because you don't get to see that these checks cleared what we would like to see is that these checks cleared from the prior accounting system and they cleared in the current period so what we should do is actually enter these checks into the system as of the prior period prior to our cutoff date and whenever the checks were entered or possibly we enter them as 1231 and then and then we'll be able to check them off as cleared and we changed the beginning balance up top to what it should be 25 to 30,000 in other words we changed this number to 30,000 or we make another journal entry for 5,000 so I can check them both off to get to 30,000 as our beginning balance and then we write the cleared we put in place the checks the two checks that were written in the prior period that brought our balance down to 25,000 and then we we check them off in the current time period so that's kind of the issue that's what we'll have to deal with with the first bank reconciliation now note the first easy method that we talked about is like well I just won't check these off and then I'll just check off the 25,000 and it'll work that will only work if these two amounts cleared and the current time period it may well be the case that you have a bunch of checks that will never clear because they're there there's something a problem there they're outstanding checks that got entered twice or something and they've been outstanding forever so if they don't clear then then that methods not going to work you're going to have to do something else to fix it right you're going to have to basically enter those checks into the system and then void them properly so that you don't mess up the prior period balances right you don't mess up retained earnings so so just keep that in mind like like a lot of times what will happen is people will have this problem and then they're like oh well I magically can reconcile it tied itself out that but that would only happen if these two actually cleared in the current period if they don't clear you're going to still end up you're going to still end up with a problem okay so once that happens though once we take care of that beginning balance problem then the following period will be really easy because this 61 241 85 will then be the cleared balance and in the following period then that's going to be the beginning balance which has to tie out because we tied out exactly to the ending balance last time and then we can just take everything off and everything should work properly and it should be easy to reconcile just remember that when we reconcile that this bit here is the process of reconciling getting this down to zero allows us to generate the reports which are the bank reconciliation showing a report that will give us the bank balance as of a point in time and then the exact difference of the outstanding checks and deposits to get to reconcile to the book balance alright so that's the general the general issue that we'll have to deal with so we'll start to do the bank reconciliation next time by just going in and ticking and tying off the deposits and then we'll do the checks and then we'll see that we'll have to add a few items and then we'll deal with that beginning balance issue