 QuickBooks Desktop 2023. Bank Reconciliation Bank Feeds First Month. 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 drop down we got the hide icon bar open windows list checked off and the open windows are open on the left reports drop down company financial it's open up the P and the L the profit and the loss the income statement ranging changing 0101232 to 123122 then we will customize it going to the fonts and the numbers I want to bring it up to 14 as has been our custom okay reports drop down again company and financial this time the balance sheet standard let's customize that report with a change of the range from 010122 to 123122 and fonts to the numbers also changing up to 14 okay yes and okay let's open the bank feed center going to the banking drop down the bank feeds looking at that bank feed center which you would only have if you had bank feeds turned on which we did in a prior presentation now we've added in the checking account that's what we're focused on here the data from the bank feed center from bank feed limbo which is what I call this area which is where the data would be before it had gotten the added information necessary to pull it through to the promised land of being creating the actual financial statements the added data we needed to add were things like the payee the customer and the account as we first added the data on the first month of information for example then we're going to have to have a lot more data input from bank feed limbo here to pull it into the creation of the financial statements but as we do so we could set up rules the rules making it a lot easier to pull that data into the system in the future now note if I go back to the homepage that we talked about areas where the bank feeds fit in well and and where we what kind of of industries or companies we might have or businesses that we could use the bank feeds themselves to create the financial statements and you want to think about that oftentimes on cycle by cycle meaning for outflows and inflows kind of distinctly how are you going to manage the outflows how are you going to manage the inflows how do the bank feeds fit into it and we've tried to make most of our books here based on the concept of us having an industry where we can construct our financial statements directly from the bank feeds meaning outflows using the bank feeds will generally create check forms inflows using the bank feeds will generally create deposit types forms and we're not then in a situation where we have to have invoices dealing with the accrual account of accounts receivable or even sales receipts which will help us to kind of match up our our cash register if we were on a cash based system but instead wait on the deposit side for example until something clears the bank and on the expense side of things the general ideas were not going to have accounts payable but instead just used the check form and so if we're waiting till things clear the bank in order to construct our financial statements then it's going to be a lot easier once we get set up for us to do the bank reconciliations because in a full service bank reconciliation process you would have to first enter the data into your accounting system and then use the bank feeds and bank reconciliation to double check it's supposed to be an external verification given you a double external check over the cash that double check over the cash also gives you verification for the other side of the transactions and that gives you a huge internal control however if we're not entering the data in our side separately from the bank but using the bank data to enter the data into our side into our system then the bank reconciliation is not going to help us to kind of give a double check in the same way we lose a lot of that verification however it's still necessary to do something that you want to check because it'll help you to determine if you entered something twice for example or if you didn't enter a transaction at all so if I go over to the balance sheet then let's change the date up here to the period end of 08 31 22 the general idea of the bank reconciliation would be here's my checking account as of the cutoff date of the first bank statement let's say and we've got the first bank statement here the ending amount is at sixty thousand six six nine ninety six is a made-up bank statement coming from the bank as of 831 22 now this amount does not match what is in our system if we were doing a full service accounting system we would expect it not to match because we would have outstanding checks and deposits that we would need to account for in the bank reconciliation process because we're constructing our books from the bank feeds we would generally expect it to match as of the same date so but it's not matching in the first bank reconciliation because we have to enter that beginning balance we've entered the data since the point in time that we started entering the transactions but we're missing that first balance up top in this case we're going to imagine that to be the fifty thousand dollars that we're going to add into the system in some way to start to get lined up and then we should be good going forward the bank reconciliation process being much easier now note when you're when you're checking the checking account with a bank reconciliation it's not just about the cash because notice if I double click on the cash we've got all the detail of the transactions here I'll bring it back well let's bring it twenty two up to twelve thirty one two two all this detail is is going into another account as well we've got the split account the other side of the transaction so the fact that cash is like the lifeblood of the company the cash flow is involved in every cycle means that if we can verify all the transactions within cash then we get a double check that the other side of the transactions are at least appropriately included that like at least there is they've been added right so that's a huge internal control we're not just trying to verify cash the cash if we can be a confident of not just the ending balance but all the activity in the cash account then that gives us a huge internal control over everything else so just remember when you enter stuff into an accounting system in my view as an accountant if someone brings me their books and it's just on a piece of paper that's not really even reconciled just like an income statement that I'm going to do their taxes with or something like that I have very little confidence that their financial statements are actually you know well done you know it might be good enough for taxes and whatnot but you don't have the double entry accounting system in that case to really verify if we're using accounting software such as QuickBooks forcing us to be in balance that forcing of assets equal liabilities plus equity the double entry accounting system is a huge internal control in and of itself but if even if I get the information from somebody and it's in QuickBooks if the reconciliation doesn't tie out once again I'm losing a lot of faith in the fidelity of the financial statements if they're using QuickBooks and having their reconciliations tie out then my confidence level goes up greatly in that case so every business should probably reconcile well should reconcile big small whether you're depending on the financial statements to create your books or whether you're doing a full service accounting system okay so that said we're going to say how can we do the first reconciliation well let's first just start it and see where that difference lies so to do a bank reconciliation we would go into the banking drop down we're going to go into the reconcile item and I'm going to do the checking account notice we can reconcile the checking account and the credit card accounts and I'm going to reconcile here as of 083122 notice the beginning balance is not here that's a problem because on our bank statement we have a beginning balance there's a couple ways you might deal with that one I could close this out I could go to the list drop down chart of accounts and I could go into the checking account here right click and edit it edit the account and I could try to increase an opening balance right here now if I've already started the business I don't really like doing that because what this will do if I increase the checking account from a double entry accounting standpoint QuickBooks will have to put another side to the transaction somewhere and I would just guess where they would put that if I close this out for example go to the balance sheet how is this going to remain in balance if QuickBooks increases the cash account by $50,000 an asset well the other side is going to go into most likely this opening balance equity account now I have posted something in there for an example but that doesn't look at that professional to have stuff in opening balance equity so so if you post to opening balance equity that's okay but you probably then at some point want to make a journal entry taking it out of opening balance equity applying it out to the owner's equity or something like that so so I'm not going to do it that way I'm just going to add the transaction myself into the system and we'll talk more about how to do that in a second banking drop down reconcile let's go back in here I'm going to make this as of 08 31 22 so the fact that I don't have that beginning balance will be okay with the bank reconciliation because I'm just going to add that beginning balance as one of the items that I check off and therefore it's going to be grouped in just for the first time in this additions area which will look a little funny but it'll be okay and then going forward everything will work out fine the ending balance is what's on the bank statement so that's going to be the sixty thousand six six nine nine six so six oh nine nine six what was it six oh six six nine six oh six oh six six nine why does it have to be all nine since six is here it's driving nine six nine six okay it's easier if you have these things side by side as now I feel I'm I'm I'm not confident that I got my nine and see that's okay that looks good so then you've got the service charges and interest earned I don't like using these most of the time because I would rather enter them myself I think it actually kind of confuses things when you're posting stuff as you reconcile that number one and number two if you're imagining the situation that we are in that we entered the data directly from the bank feeds then the bank feeds will have picked up the service charges and the interest earned so we don't really need them in that instance so I'm just going to continue and then I'm going to uncheck everything that's after the date here notice that if I was doing a full service accounting system we would be entering items on our side separate from the bank if for example I wrote a check I would write it today it wouldn't clear the bank until some point in the future so notice that there's no possible way that something could have entered in the bank on a date you know before we knew about it we knew about it first and then the bank knew about it so I can hide confidently everything that's after the cutoff date even if I'm using a full service accounting system now in our case we put everything in our system we're going to imagine from the bank that means that our dates will tie out exactly to what's on the bank statement because we waited till the things cleared the bank before recording them so so normally then if I had the bank feed set up I could just use this check all because like I say we put all of our data in place from the bank so it should tie out exactly and so what we're really looking for when we do the bank reconciliation is for us to have entered something two times or not entered something at all if on the other hand we were doing a full service accounting system we would have to tick and tie I'm going to unmark they might have to tick and tie each of these items out so let's just kind of give a quick recap on that the beginning balance we're gonna have to deal with that shortly that's our first bank reconciliation kind of issue we've got the additions and the subtractions increases and decreases to the checking account which are detailed down here below now because we're we have a system where all of our transactions are electronic then the bank statement is gonna have all the detail on it in a similar fashion as we saw in the bank feeds it'll have the date it'll probably have a description for it that was given through the electronic transfer and the amounts that will be increasing and decreasing if on the other hand we had items that were not electronic meaning for example I deposited cash into the bank directly was just a cash deposit well then all the bank has is the date and the amount of the cash deposit here if on the on the other side I wrote a physical check then what the system has is a date that it cleared not the date we wrote the check the check number the amount you might be able to then check the cancel check but that's what would typically be on the bank statement also just note that because we have bank feeds and things like that when we think about the bank statements we we often think well those are irrelevant now because I have the bank feeds which gives me all my data real time but the bank statements are still quite important because you want the cutoff the cutoff is going to be important because I want to check my numbers periodically as of a specific point in time the bank statements give you a clear delineation between one month and another month so when I roll forward like from the end of this month to the beginning of next month this ending number will match the beginning number for the next month so that's going to be a come important component if I was using a full service accounting system entering say checks handwriting the checks sending those checks out to someone else to cash then then when I enter the check into the system separate from the bank feeds if I actually wrote a physical check entered it into the system then I would have it in my system before the bank knew about it and that there'd be a significant difference in dates between when I wrote the check and when it cleared the bank because because someone else is going to have to receive the check and then deposit it and so on so that's when the the the reconciliation full service accounting system is really important because you're going to end up with these timing differences of outstanding checks and deposits we're not going to have any outstanding checks and deposits because again we're imagining we constructed our financial statements from the bank waiting till everything cleared the bank and then using the bank feeds to record our accounting system and checks don't really fit into that very well electronic transfers fit into that kind of system quite well because there's that you don't have that same time constraint between when we actually purchased something and when it cleared if you do an electronic transfers okay so now we still got that beginning balance problem so if I check all of these off for example if I if I say my bank reconciliation I check all of these off taking and tying each one of them then I'm still out of balance by you can see 50,000 right here so this is kind of a recap of everything that's that's been checked off the beginning balance does not tie out but my deposits are now at 13,598.25 13,598.25 and the the total checks are at 2,928.29 so that's correct I'm just missing the beginning balance which is of course the 50,000 I'm going to enter that into the register now if I go to my balance sheet what's going to be the impact on the balance sheet well the cash account needs to go up by 50,000 which is the beginning balance the amount that was in there before I started adding the bank feeds the other side typically shouldn't be going to revenue because we're going to imagine when you do your accounting system and you start a new accounting system then typically you want to have a cutoff date from the prior period to the current period the cutoff date should usually be be the beginning of the year so if you started your new accounting system in January then you want to make your first beginning balance entries like the day before January possibly so that your everything is lined up as of January for the balance sheet and so or if you started the new company file and you're the one that put in the 50,000 into the business checking account then it would go into an equity account which would be like an investment type of account it wouldn't be income would be the point so how can we put that in here I can go to the list drop-down chart of accounts let's double-click on the checking account I'm going to add a transaction I'm going to imagine I put it in there you know the month before the month that I'm in so I'll say this is as of let's say oh nine or what was it oh oh seven thirty one two two and I'm not gonna have a number to it I'm gonna say it's a deposit of 50,000 the other side is not going to go to an income statement account but rather an equity account that being the main point if you entered the beginning balance through QuickBooks it would put it into opening balance equity that's not a very professional account though you can either put it into investments if you're the one that put it in as a beginning balance or if it's a result from prior the prior accounting system then it would be part of equity right it would be part of the equity equity represents I mean owner's equity owner's equity or retained earnings if it were a corporation represents the accumulation of earnings that you have not yet distributed out in the form of draws or dividends if it was a corporation this investment account would be us putting money into the business which isn't always there we don't always track that because hopefully we're taking money out of the business but you could track that as a separate equity I'll put it into there point is it needs to be some kind of equity account so then if I record that and go back into our balance sheet we're gonna say okay now the checking account has been increased if I bring this back a day boom by the I put it in did it where did it go increased did I put it in there as of like last year or something yeah I put it in there at there it is 731 22 okay that's right right yeah so then if I close that back out and I go back to my record and the other side I put into equity so now it's it's an equity the owner's investment here so if I bring this back to 010122 so there's the 50,000 okay so it doesn't affect the income statement now I can reconcile bank feed bank reconciliation I've got that added amount notice it doesn't it's not going to be up here in the beginning balances the way I did it but I could still just check it off and now it'll be in the deposits making this item go to zero which means that our cleared balance matches our Indian balance now so in our case there's no difference so so this process here is the bank reconciling process if we had a full service accounting system we would expect there would still be a difference between the ending balance here the sixty thousand six six nine ninety six and what's on our balance sheet as of the same date there's not a difference here anymore because we're not using a full service accounting system we're depending on the bank therefore there's no timing differences there's no outstanding checks and deposits so that's going to be a big difference between your bank reconciliation processes you know just to be aware of and so that's going to be the cleared balance if this item is not at zero this difference then you should be able to go back up here and find tick and tie off everything one by one each of the transactions go in there one by one tick and tie them off find what the difference is because if you plug the difference which you can do if this was off like I didn't have something ticked off and I reconciled I could force it to reconcile by saying enter an adjustment but even though you might say well it's only off by a few dollars so I'm just going to do that you could do that but the fact that this is only off by a few dollars might might be due to the fact that there's like 10 deposits and 15 checks that haven't been entered which combined together to be off by a few dollars and remember we're not just trying to verify where the Indian balance is on the checking account we're trying to double check all the detail of the transactions as well 1231 222 we're trying to see that all this has been entered correctly the detail because that shows that all the rest other side of the transactions are correct so if you if you fudge or or force a reconciliation even a small one the amount of internal control that you're getting from reconciling goes way down so and you should be able to figure it out because it has to work right because you built this from the bank feed so you could figure out what the difference is by just ticking and tying them off and then make the adjustment necessary so if I reconcile this let's go ahead and reconcile it it generates the reports so I can make the reports and display the reports in our case the reports aren't as helpful I'm looking at both the reports now I'm going to customize them and say we want to bring this up to let's say 16 so so notice in in this system there's no difference between our cleared balance which is basically the bank statement balance and the book balance the amount on the balance sheet as of the cutoff date because we constructed our financial statements from the bank feeds but in a full service accounting system you'll recall there will be a difference between the two and therefore that's what the reconciliation will be so this reconciliation is kind of boring there's not much going on with it because this top half is really a recap of what's on the bank statement which we already have right it's right here except for the 50,000 due to the first bank reconciliation has been included here in this line item instead of in the beginning balance which will not be the case next time there's our ending balance for the cleared balance which represents what we checked off in the system which should match the bank statement and then the register balance is what's on the balance sheet they're the same and the reconciliation is usually that the reconciling between these two numbers which meet which would normally be outstanding checks those we wrote that haven't cleared the bank yet and outstanding deposits deposits we've made that haven't cleared the bank yet there are none because we're waiting till they clear the bank before we record them and then down here we've got the new transactions which aren't really necessary for a bank reconciliation as well if I close this out then we've got the reconciliation detail which is basically I'm just going to increase the size again let's make this one 14 the same stuff but it gives you the the detail of the checks which again we already have the detail up top then the bank reconciliation to me really starts right here with the cleared balance so you got the cleared balance and then the register balance but there's nothing between these two if there were they would be outstanding checks and deposits and you really want to have if there was a difference the detail report because if you were to give this to say an auditor and there was a difference be due to outstanding checks and deposits you want to know what the outstanding checks and deposits are and and if you use the summary report it's just going to say hey there's six outstanding checks and two outstanding deposits that's not helpful I need to know what those are so that we can then you know test and see if those are real checks and deposits and whether or not they cleared in the following time frame so if I close this out just also realize that if I close this out and I go back into the banking again and I go into my my banking reports and look at the previous reconciliation I can only get back to the previous one and so and it also opens up in like a PDF file so they're a little bit different because this is not a report that's normal like a normal report which is actually being constructed as we do the data input this is an internal control double-check report verifying our numbers comparing them to an external person or institution the bank also note if there was something wrong with the bank reconciliation you would have to you could fix it or you'd have to undo the prior bank rec which you could go but to the banking and you can go to reconcile and you can undo the prior bank rec and then do it again if it was necessary to do that also note that if you do have out differences between the register and the bank due to outstanding checks and deposits you might want to print out the bank reconciliation so that if there's an issue in the future someone deletes something you have the hard copy and you can compare the hard copy to what is currently in the system and try to figure things out from there next time we'll do another bank reconciliation and going forward from here the bank reconciliation should be really easy because if you're checking account kind of ties out to what's on the bank then you can just go into the bank reconciliation and just check everything off and that but it's still something that you want to do because it'll give you that double check that that you have entered everything from the bank feeds and have not double entered entry thing and we're have not entered any or have not missed anything that has been entered so it's still a useful tool although it doesn't give you as much internal control as it would if you had a full service accounting system in which you were doing your own accounting without the bank and then using the bank as a double check over what you've done so those are the differences between the two we've got a whole another section or a course on bank feeds and a full service accounting system if you want to check that out and dives into to outstanding checks and deposits in more detail