 In this presentation, we will start the bank reconciliation process for the first month of operations focusing in on the beginning balance and the deposits. Let's get into it with Sage 50, Cloud Accounting. Here we are in our Get Great Guitars file. We're going to start off by opening up our balance sheet. So we're going to go to the reports drop down up top. We're going to go on down to the financial statements, that first one being that one we want, the balance sheet, double clicking on that balance sheet. We want it for January. We're going to be going back to January because we're going to reconcile the first month of operations first. We're going to then say, OK. And there we have our focusing in on the cash account as of the end of January. That being the 95, 381, 42 on our books. However, on the bank statement, and here is our bank statement as of January 31st, it's 109, 917. Those two amounts, they're different. So that's going to be something that we're going to have to reconcile. So we're going to have a couple of things that will be involved within the reconciliation process. And that's going to be that there's going to be some things that we're going to have to add if there's something on the bank statement. In other words, that's not on our books. Then we're basically going to add it if there's something on our books that's not on the bank statement. Those may be outstanding items such as outstanding checks and deposits. We're going to be focusing in here on the deposit side of things as we go through the process. Remember, if it's the first bank reconciliation, you're going to have to first think about that beginning balance, which can cause you kind of some problems, because we took that directly from the balance sheet of our prior book. So you might take it from the prior bank reconciliation. Either way, there could have been outstanding items, one involved in it, from the prior reconciliation process. And number two, you might have put it on there. And when you do the reconciliation, the software is not going to pick it up possibly as the beginning balance. And so you're going to have to basically check it off. So that's what we'll have to deal with. We'll check it off as we go so we can reconcile. So as we do that, you'll get a concept of how the reconciliation kind of works on it for the first month. Once that's done, once you do the first month of reconciliation, that's a unique problem to the first month of that reconciliation. The rest of the months will all work out because the ending balance will be the beginning balance of the next month. And we'll show up on your reconciliation books within the software properly. So let's go ahead back over here to the reconciliation. Let's go back to our data. We're going to go into the banking section, of course, because we're reconciling the bank accounts. And so within the banking section, we're going to go down to the reconcile accounts. So within the banking, we're going to go to the reconcile the accounts. I'm going to make this large so that we can see it better. And then I'm going to select the magnifying glass. And we want to hit the checking accounts. So we're going to take a look at that checking account. And there it is. So here is our information. And the reconciliation process is, in essence, going to be. And I want to, the statement date should be, let's put this back to January 31st, January 31st. That's important. All right, that limited our transactions down below. Notice you also have some filters up top for all deposit and checks. Checks and bank deposits, deposits, and bank credits. And I should be said, check and bank debits or deposits and bank credits. So that's useful because like we're going to do here, we're going to focus in on the deposits. And I could go here and filter and just look at those deposits. And that's really nice. So right now, though, I'm going to select all of them just so we can see the data. This is what has been entered into our system into the checking account. So this is what's in the checking account on our bookkeeping side of things. This is in our system in our books. We're comparing that to what is on the bank statement. So what we want to do then is take everything that's on the bank statement and make sure that it's on our books. If it's not, there's probably a problem. We have probably have to add it into our books. If it's on the books and it's not on the bank statement, then it may be an outstanding item. Now, let's first consider this beginning balance that 25,000. So the 25,000, if I go back on over to our information over here, you would think that would be the beginning balance in the system. But in our case, since it's the first bank reconciliation, it has no beginning balance from the prior bank reconciliation. It says beginning balance here, but it's not being included really in the bank reconciliation as the beginning balance. So all I'm going to do to change that, to fix that, is say, okay, let's just pretend our beginning balance is zero, right? And then I'll just check it off as one of the things to check off along the system. So that's all you're going to do to kind of fix that problem. You'll be able to reconcile. You just got, I'm just going to check off the beginning balance. So that over here that I'm going to say, I'm going to indicate that I found that one. I'm just going to check it off as one of the things that we'll reconcile. Now, in the second bank reconciliation, we won't have to check it off because it'll be the beginning balance and it won't be a problem. But you can see it's just one other, you know, reconciling item in essence. That's all we're doing here. All right. And then if I go back on over, I can find the rest of these. Now I'm going to go ahead and enter the ending balance down here. So the ending balance for the bank statement is going to be that 109917. So this should be 109917 109917. There's no pennies involved. I think I took the pennies off. Nope, it's even. All right. So there it is. So now we see the unreconciled difference over here. That unreconciled difference, once that gets to zero, then will be reconciled. Now, if this thing is anything other than zero, then we're not really reconciled. And you might say, well, what if it's down to like $2? And that's close enough. It's not really because, I mean, if it's down to $2, that $2 could have been made up of like five checks and three deposits, right? I could have been made up of a lot of outstanding things that aren't included in the system. So you really want to, if it's zero exactly, you might say, well, zero could have been made up by a debit and a credit or, you know, an increase in it. Yeah, but if it's exactly zero, the likelihood of an increase and a decrease exactly tying out is a lot less, right? If it happens to be anything other than zero, then the likelihood of multiple things going up and down and not tying out is much higher. So it goes, you know, it's much bigger if it's anything other than zero. And it really should be possible to get it down to zero because you're tying out exactly from the bank to the book. So in other words, if it's on the bank statement and it's not on our books, we're just going to add it there. So it has to tie out because all I'm going to do is find all these numbers and then check them off and they have to check off. And if something doesn't check off, then I'll fix it on our bookkeeping side. So let's take a look at what that looks like. First, let's take a look at the deposit side of things. So I'm going to go back on over here and let's use our function up top to say, hey, I just want to look at the deposits. Can you just clear this out to just the deposit stuff? And then it's like, yeah, we can do that. And so there we have that. And now I'm just going to go, I'm always going to go from the bank on back over. So here's the 65,000. And then I'm going to go back over here. Here's the 65,000 check, found it. And then I'm going to go back over here and I'm going to make it green. I'm going to make it green. That's going to be an indication that I found it green is good. And then we're going to say, uh, 50,000. Is it over here? We're going to say, yeah, there's the 50,000. Notice I'm checking off basically just by amount. Now the date that we have here should be fairly close because when we make a deposit, it should clear the bank within like three days. So with the deposits, you've got basically the, the, the date. It should be somewhat close. It may not be exact. However, and in the example problem, if I didn't line up the dates perfectly, I apologize for that. But, uh, uh, the dates may be not be exactly right, but you would think that, uh, obviously on the bank, it should be a little bit later. You would think it'd be like a day or two later. Now on the check side of things, when you write a check, the date could be way off, right? Because someone could have, could have hold on to the check and didn't deposit it for like ever. So you don't have that, but you may have a check number that could help you to write it off. And if it's an electronic transfer, electronic deposit or check, the date should be fairly close. Also, if you're talking about electronic transfers here, if you, if you got this like from bank feeds or something, then you may have some more detail in terms of references, like a customer or some other, uh, reference information. If it's not, then all you have is a grouping of the deposits. And that's why it's really important. You can see now when we talked about how we're going to, how we're going to group things together and put them into the bank account, because when you check the thing off, if I had to add up like five different deposits to check off, to, to tie out to what's on the bank statement, that will get tedious. That will be difficult. That will make things a lot more difficult. And if you're dealing with a lot of deposits, such as like something that came in through from like a credit card statement and the deposits are mixed up in terms of the grouping as to your books versus how they're going to appear on the bank statement, and that's going to be a mess, right? So the only way to get around that is whatever your system is, you want to be batching your deposits into your bookkeeping system in the same format as they will be on, on the bank statement. And if that means you got to, you got to correlate and talk to the credit card company and say, Hey, look, you've got to batch these things in some way that I understand it so I can group this together and talk to the bank and to do that, then that's what you got to do, right? If you have to go through a clearing account in order to bring bring this things over so you put the money into a clearing account as we talked about and then transfer it as you make the actual deposits in the format that they will appear on the bank statement, then that's what you got to do because you really want to be able to do this bank reconciliation process. All right, so let's go back on over. We're going to say there's the 50. I'm going to, I'm going to check that off, right click and check that off. And then we've got the eight four three eight, the eight four three eight. Let's go back on on over here. There it is. So I've found that one and that one's done. So check that off. There's the eight four three eight. Then we have the 13 13192, the 13192. Do we have that? Yes, it is here. And there we have it. So that's all the deposits that we have on the bank statement side of things. So I found all the deposits over here. So we found everything on the bank statement side of things. However, we have not found everything on the books side of things. So we don't have this one here and that's okay because that's an outstanding item. So we're going to say that's outstanding. So note that it's on the 29th. So we might say, Hey, I went to the bank and deposited it on the 29th. My books know about it, of course, because I made the deposit, but the bank may not have processed it, processed it yet. Now the bank, it should only take like three days for a deposit to process or something so that it should be on the bank side of things in like February and note that at the time we're doing the bank reconciliation, it's going to be sometime after January. So if I'm concerned about that deposit, I can go to the bank and see if it cleared in February. If it cleared in February, then it's just a timing difference and it's a reconciling item as of the cutoff date of January 31st. So I'm not worried about this, this amount not having cleared it cleared. That's fine. And it's going to be a reconciling item to help me verify the balance for the bank reconciliation as of the January 31st, 2020. So that's going to be our reconciling item on the deposit side of things. Now, oftentimes on the deposit, on the check side of things, you probably can have more reconciling items. So next time we're going to go to the check side of things, if you actually write a lot of checks, those are the things that are going to be most likely to have a reconciling item because the checks have to then be received by the recipient. They have to then, you know, take that to their bank. Their bank has to then talk to our bank before our bank knows that the check actually cleared and that could take a long time. So the more you have electronic transfers and electronic payments, then the timing difference should be fairly short. And you should have fewer reconciling items most likely. The more checks that you write, then the more likely you're going to have a more lagging timing difference on the deposit side of things. So that's something to be aware of. And so next time we'll go to that side. We'll go to the check side of things and continue on with the reconciliation process. That's it for now. Let's get out of here.