 QuickBooks Online 2024. Bank reconciliation month number one checks and cash decreases. Get ready and some coffee because we're going to save time 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 financial statement reports as we do every time reports on the left in the favorites right click in the balance sheet opening a link in a new tab same with the profit and loss report also the trial balance right click open link in a new tab let's check out those tabs we open tapping to the right the hamburger closing it changing the range 010124 tab 022924 tab we want to see it on a month by month side by side poor father running the report tabbing to the right closing the hamburger to the left changing the range in the middle 010124 tab 022924 tab and then changing the months on the left and then running the report on the right and then going to the tab to the right closing the hamburger on the left changing the range in the middle 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 now i'm not saying that subscribing to this channel crunchy numbers with us will make you thin fit and healthy or anything however it does seem like it works for her just saying so yeah 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.com or accounting instruction.thinkific.com 010124 tab 022924 tab and the drop down i feel like i'm announcing a soccer game or something here and the ball is at the side now it's in the middle okay we're going to go into the running of the reports let's go back to the balance sheet and we've been doing our bank reconciliation remembering that the bank reconciliation is basically i would say mandatory for any kind of business as an internal control whether it be large small uh or using bank feeds or not using bank feeds we're doing the first month reconciliation which has that beginning balance issue that we will be addressing at the end of the first month of reconciliation this is what the books currently say at 88, 810, 27 this is what our mock bank statement says 61 241 85 so we need to do some reconciliation and that's what we're doing at this point in time so let's go back to what we started last time the tab on the left we're in the transactions remembering that the bank transactions over here bank feeds can help with the bank reconciliation as we'll see in future section or course but it is not the bank reconciliation to do the bank feeds the reconciliation is over here even if construction the books directly from the bank then you still want to do the reconciliation uh because it'll at least double check that you haven't double entered anything or uh hadn't pulled some feed in for some reason we're in the checking account we're going to resume if you weren't resuming but was starting from scratch you would have the info in here being the beginning balance we can see as a problem because that doesn't tie out to our beginning balance over here we will deal with that later that's the first bank rec problem the date is the date on the bank statement we're not entering anything for the service charges or interest I think these are old kind of things that we don't really need anymore but are pulled in as a legacy article from prior times all the way back to the start of the desktop versions so then we have our reconciliation summary up top the statement ending balance which we just typed in there directly from the bank statement we have the cleared balance which is this formula below beginning balance payments and deposits which will give us our difference the difference between the statement balance and the cleared balance currently we've only done the deposit side of things the deposit side of things now matching out if I go back on over we're at the actually I'm going to uncheck the 25 here for now we're at the 143 70 that matches the 143 70 85 on the deposits now we're going to do all of the decreases decreases typically being the largest and most complex portion of the bank reconciliation process if your deposits are properly formatted and grouped in your accounting system so let's first just give a quick recap of the kind of decreases that we're going to have and what information the bank knows about and what they don't know about so first we have a check type of transaction if we have a check then that means that we physically wrote the check or printed it out of quickbooks recorded the transaction when we wrote the check and then had to send the check to somebody they have to receive it they have to deposit it in their bank and communicate with our bank before the bank knows about it so if we're still using manual checks that means that we're going to have a big difference between the date the date is going to be much less reliable the date in our books is going to be much sooner than the date on the bank side because the bank does not know about it until the check has been received deposited and cleared basically on their side but we do have the check number with the check which is great giving us an added level of ability to tie out what is happening even though the date is not going to be as relevant for us and of course we have the dollar amount that's what the bank knows now the bank also has the cancelled check which usually isn't going to populate in the bank like a memo area but is something that you can often go to your online banking and then drill down on so if you need to see like who the vendor is and what not or who the who the yeah who the vendor is you might be able to go to the bank statement and look at the cancelled check and see the actual check from there now if it was an electronic transfer then of course you're not going to have a check so if you're paying people buy electronic transfer you're not going to have a check but the date is going to be much more close so even if you're doing a full service bookkeeping system where I pay something in an electronic transfer enter it at the point in time the transfer happens it's still going to clear the bank between like one to three days typically so if we do a full service accounting system our date in our books will be sooner than the date on the bank's books still but they will be pretty close and likely for many small businesses at least if we're doing electronic transfers we're probably going to be dependent on the bank rather than enter the transaction on our side at all in other words we won't even enter the transaction on our side wait till the thing clears the bank and then record the transaction with the use of the bank feeds in that case those are the easiest transactions to reconcile because we're not even doing a full service bookkeeping system we're just we're just taking the bank's numbers and pulling them into our system so those types of transactions again will be the easiest the easiest things to reconcile and then we could have some transactions that are facilitated you know by the institution that we don't know about like the bank charges so the bank service charges they charge us a fee we didn't know about the fee we couldn't have entered it on our side because they didn't invoice us for it they just took it out of our account because it's a bank charge so for that we would have to enter that in our system if we didn't use the bank feeds but if we do have bank feeds turned on then we're probably going to be able to pick that up with the bank feeds the bank feeds will show that transaction will approve the transaction and that is how that will typically be recorded we also could have money that we took out physically possibly at an ATM or at an institution or at one of the bank locations right so the money that we take out would be like a withdrawal and in that case all we would see if we took out cash is the dollar amount that was taken out and the and the date we're not going to see what it was taken out for which could be a problem all right all right so that given that what we're going to do the same kind of process we're going to basically say if it's on the bank's books it should be on our books and if it's not we're going to have to add it to our books unless the bank is wrong which is not typically the case if it's on our books but not on the bank's books then that might be okay because that might be outstanding checks that we know about but the bank doesn't know about therefore their reconciling items because of that system then we typically want to be going from the bank statement to our books not from our books to the bank statement because everything on the bank statement should be on our books right otherwise we'll get confused so I'm going to say there here's the 12,000 101 hopefully our check numbers match up but if they don't bear with me it's a practice problem I tried to line everything up here but we'll go to the payments so so let's see we got uh this one uh was uh was 12,000 12,000 so this 12,000 I entered with an expense form instead of a check form so we don't have the check number but I could still tie out the the 12,000 and I can see the date is pretty close so I fairly good confidence that that's the one again if I wanted to look at the actual vendor I can I can look at the vendor here and the cancelled check possibly go into my bank account if I needed to double check it there so so I'm going to then go back on over here and say okay that one is uh checked off I maybe I'll do the whole thing here and make it green okay then I have the 1000 the 4000 now these two I'm going to go over and say hmm those are not here if I look through here I don't see those and that's going to cause me some worry that's the beginning balance problem one of those issues those are checks that we wrote last month in December in the prior accounting system which were outstanding as of last time and and now they're clearing so what do I do with those okay I'm going to deal with those later right now I'm just going to keep on pushing forward so I'm going to say all right I recognize that those are a problem let's go to the 16 000 on uh 1002 is the check number and so we'll say okay 16 16 right there I don't have the check because I entered it as an expense form okay but I'm pretty confident that's the one so I'm going to say that one is checked off 7 114 so 7 000 is here so that so again I entered it as an expense form okay so that one good I'll say and then the 6 8 9 2 on 118 1005 so there's this one and the check number actually ties out this time that is good again a lot of people are I'm going to minimize this by the way a lot of people probably are using electronic transfers these days so you're not going to have the check numbers but your dates will be more relevant in that case okay so then we're going to say that one is is gone or done or checked off let's say 72 1006 so we've got the 72 on one that's check numbers 1006 okay so that's good and then I have the 37 80 1007 so there's the 37 80 1007 1004 okay that's the check number 1004 notice over here they're not exactly in the same order and that's something to to recognize why would that be the case because on this side of things they have to put it by they're going to put it by date most often right they're going to sort their their transactions by date but the date that the transactions cleared the bank might not be in the same order that we entered the transactions on our side especially if you have check forms because because it'll depend on the people that receive the check and how long they took to deposit the check now if they're all electronic transfers again it'll be probably pretty easy because then you're probably just entering your information on your side from the bank and everything will tie out like exactly right so this this one's 1004 37 80 did I already do that one I think I did that one that one's done and then this one's let's try to do two at a time let's get crazy 12 000 and 6 20 so 12 000 here and 6 20 boom leveling it up right there leveling it up all right okay and then we're going to go back I've done those two and so and then the last one is going to be 15 000 15 000 here we go so that one has been found and I'm going to say that one's good okay now these two I'm going to say I don't find those I don't see the withdrawal and I don't see the bank service charges and if you were using bank feeds you probably would see those because they would come in through the bank feeds and then you would have to enter them from the bank feeds if you're not using bank feeds then you would reconcile either way you could have a similar issue you know with those transactions you're going to have to record them you know as they come through on the bank feeds so as of now we have these two these two that we're going to deal with later and we have these two that we're going to have to enter and then we have all of these ones that are in our books but not on the bank statement what about those those might not be a problem how can we check if they're a problem or not well we could look at the bank state or the bank account online after uh january in february to see if these cleared and if they all cleared in the following month then they're not really a problem because they're just the outstanding items they are the timing differences they are the reconciling items between the bank balance and the book balance that will be on the report that will be generated once we finish our bank reconciliation process so you can see what we're doing we're finding everything on the bank statement on our books but the stuff on our books might not be on the bank statement that's okay that will be the exact difference once this number gets down to zero okay so now let's deal with let's deal with with these these two down here so we have a withdrawal and we've got the bank charges so what i'm going to do is i'm going to say let's leave this for now i'm going to save it for later and enter those transactions in and then i'll come back and be able to tag those off so i'm going to i think the easiest way to do that is in the register so i'll go directly into the the check register and say where's that it's in the uh it's in the transactions check register close on the hamburger we're in the checking account i'm just going to go into the register and enter these directly into the register let's select the drop down and i'm going to use an expense type form because these are decreases so i'll use an expense type form as of the end of january that's what we want so the first one we had was the bank charge i could say it's what do we say chase or who's our bank i don't know chase let's say and we're going to say chase is the vendor this time and this is going to be bank charge i'll put in the memo it's going to be a payment of $15 i believe it was and then i'm going to see if quickbooks has a bank charge fee which it typically will so because bank let's see if we have bank service charge hold on a second bank service i know it has one there it is bank fees and service charges so it's a sub account of something on the general ledger but there it is let's use that one it's a sub account of general business uh expenses okay so i'm going to say that one's okay and then that should allow me to add the bank charges so i'm going to say all right let's save that and let's do another one for the withdrawals so this one the owner took the money out so i want to put owner as a vendor this time and that's because it's not really a vendor but we can only have a vendor or a customer so i'm going to say vendor because the money's going out and then what this was a draw now here's where the issue is it's a payment i know what the amount is the amount is 150 150 dollars if they took that out of an ATM or of of the bank then the question is what was it for and hopefully what you'd like to do is say uh and if you're a bookkeeper you'd like to try to manage with your clients and say hey look don't take money out unless you're taking it out as a draw it's for personal use you're going to take it out and then you're going to use it to go to disneyland or buy your personal dinner or go to the movies whatever you're going to do what you don't want to do is take the money out and then pay for business stuff with cash why why not because there's no audit trail then because we as the bookkeeper don't know where to put it on the expense side of things because we see the money coming out but we don't know where it should go now note that this idea of an audit trail for taxes if if we're thinking about taxes in the united states on the expenses if we're looking at the income statement you have income minus expenses expenses are deductions for taxes everything's flipped on its head tax the deductions are good we want net income to be low on the tax return so we pay less taxes so that means that the expenses are good if you have something that's a legitimate expense you want the audit trail because if the government came back and audited you we would like to say look here's the money that was electronically paid to whoever the vendor is uh and it's a legitimate business expense right so so that's why for any legitimate business expense you would typically want to write a check you would typically want an electronic transfer so that you have a clear audit trail trail of who you have paid if you're paying cash for something you don't have an audit trail you have to like save receipts like the old days you're gonna have to have a bunch of receipts that you can then make a copy of and put into the system but that's not the ideal way to do it now sometimes cash is still king like if you're tipping people and whatnot maybe the cash will go a little bit longer some people like doing transactions in cash so if you still have to use cash fine but the general rule is i would like to not use cash and just use electronic transfers and checks for business stuff if possible and therefore any draw of cash i can assume will be a draw from the owner for personal use in that case it'll be part of the equity decreasing the equity account over here as a draw instead of going to the income statement as an expense so we'll show both methods here i'm gonna imagine it's an expense so we're gonna say it's an expense i don't know what it was for i'm gonna put it into miscellaneous expense so other miscellaneous expense and then next time we'll show it as a draw and we'll look at the difference between those two things so let's go ahead and save it so we have recorded new transactions that we knew about now because of the bank reconciliation if i go to my my balance sheet my bank balance has now changed if i go into the uh the transactions we should have then the bank charges and the expenses that we put in place let's go back let's go to the income statement where do they show up on the other side of the transaction we should have bank fees that are now under business expenses i'm not sure i need the subcategory of business expenses so i might remove you know i probably if i have time would remove that we might do that later and then the other side we put into miscellaneous expenses which they put down here into other expenses which it may or may not belong in other expenses a lot of people dump stuff into the miscellaneous expense that are normal business expenses but they have no other place to put it so again i'm not sure that categorization down here would be appropriate but if you properly used it that might be the way to do it because these would be expenses that we don't know where they go can't categorize them therefore they're down in the you know in the other area but there they are so that's that and now if i go back to the first tab and we go back into our transactions and reconcile we can continue with our reconciliation we will resume the process closing this out don't show don't show me this again i told you once i've told you once i told you a thousand times so this is going to be then 15 and 150 we should be able to find those and check them off here they are the 150 and the 15 done we'll x those off these have been found boom all right so now we have everything that has been found except for these two so if i look at if i look at my balance now at this point in time i'm going to say okay what what is happening here we've got the we've got this one one one one one eight two nine that should be there minus the one thousand minus the four thousand is going to give us the one oh six eight twenty nine and that's what should be over here now one oh six eight twenty nine because i have the that five thousand that's messing me up right now so i have the five thousand messing me up there and i have uh i have this 30 000 which is messing me up for the beginning balance which is showing on our side as a deposit instead of the beginning balance and it's showing as 25 000 notice that those two things net each other out we'll talk more about it later but if i if i was to say hey hmm i'm off by 25 000 right here i don't know like if i didn't know what was going on i might say well i don't know what's going on but if i just click off that 25 000 boom the difference is down to zero i'm good to go and you could kind of do that uh if you if you you know in some cases that might work however you're not really entering everything in there and that will not always work right why does that work in this case because because the difference between the beginning balance of 30 000 and uh and and this and these two checks are is is the difference of the five thousand right that's netting out to the five thousand but if these checks didn't clear meaning these were checks that were written were assuming in december but then they cleared in uh in january which were reconciling now but a lot of times you'll have checks that are on the books that shouldn't even be there because because they were entered twice or something and they're never gonna clear if they didn't clear in january this will not happen if this check right here this one thousand doesn't clear in the following month then that won't work because now you can have four thousand here versus a difference of five thousand so i just want to i just want you to note that that could happen and that could kind of work even if it does work that way you still want to be skeptical to do that because what you'd really like to have happen is to show that these these checks were written in the prior period and they were cleared in the current period which means we would like to actually physically put these checks in our system as of the prior period and then we'll adjust this beginning balance to be 30 000 so it'll match what we have so we'll have the same beginning balance of 25 thousand but it will be in there as a 30 000 here and two checks the four thousand and one thousand representing the outstanding checks that were in our system simulating what we would have had in our prior bank reconciliation in the prior accounting system having those outstanding items you know representing the beginning balance so we can properly reconcile so we'll do that next time so i'm going to uncheck this right now and then we'll dive into that in more detail uh next time and and once we do the first reconciliation again the next reconciliation will be easy because we'll have a beginning or cleared balance which will be proper which is in the same accounting system which will then be the proper beginning balance for the following month let's take a quick look at our trial balance just to see where we stand because we did make a change so here's our trial balance as of now so these are our balances if your numbers tie up to these numbers great uh if not try changing the date see if it's a date range issue all we did was adjust the bank account and then we made adjustments to that miscellaneous account down below as well as the bank uh charges which are right here i believe the 15