 QuickBooks Online 2023. Bank reconciliation month one overview. 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 open the free QuickBooks Online sample company. If you want the two open at the same time, we suggest using incognito or another browser. You can open incognito if using google chrome by selecting the three dots up top incognito windows typing into the search engine QuickBooks Online Test Drive. We're using the sample company to compare the accounting view the one get great guitars is in and the business view the one the sample company is in if you want to change between the two views cog up top change view down below that's where you go. All right let's going to duplicate some tabs like we do every time right click on the tab up top to duplicate it so we can put reports in it right click the tab up top and duplicate it so we can put reports in it and then go back to the tab in the middle and then the reports down on the left hand side we're opening up the balance sheet the balance sheet again and then just so you know on the sample view and the business view or the business overview that's where the reports are at on the business view just so you know and 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 then 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 then let's go to the tab to the right and then go down to the reports on the left hand side and open up the p to the l and loss profit loss close up the hamburger and change the range from 010123 to 022823 hitting the drop down i hit it don't hit it too hard you don't want to break it go into the months and then we're going to run it to refresh it so we got jan feb tote go into the tab to the middle close up the buggy and change that range 010123 to 022823 i'm also going to go to the months i'm going to hit that drop down but not too hard months run it to refresh it that's the setup process that we do every time we're now going to go through the bank reconciliation process and we talked about kind of the overview or the misconceptions related to the bank reconciliation so last time remembering that whether large or small no matter the industry reconciling is important sometimes it'll be easier than other times depending on how you've got your accounting system structured but no matter any time you should be doing the bank rec somehow some way some shape some form so we'll start with the first bank rec of january the month of january which will mirror a lot of people's kind of issues that they might have with the first bank reconciliation and then in the second bank rec will do for february will represent the more standard bank reconciliation for a company going forward after having kind of gone through the hurdles that sometimes are there with the first bank reconciliation now just a quick recap on when the bank reconciliation will be easier or more difficult remember that if i go back to the flow chart and we look on the customer cycle here if you are constructing your books from the bank statement then the bank reconciliation will be quite easy but only some industries can do that so you might say if i just turn on the bank feeds and i make my accounting books from the bank feeds then the bank recs are going to be easy but remember that on the revenue side for example uh if if you're in a gig work or something like that you're getting paid by youtube or something like that then yeah you can wait till it clears the bank and then record the the income with a deposit form and because you're recording your information directly from the bank you're not really doing a full service accounting system but it's fine if that works in that type of industry you're relying on the bank to record your books but most a lot of industries they're if you're at a cash register you can't do that right because now you've got to record the sales on your side most likely make the deposit and then possibly match with the bank feeds you're going to need to reconcile there's going to be possibly some timing differences there and if you're doing an accrual system now you have a whole kind of component that's non-cash related so once again you can't just record your books from the bank statement and on the vendor side oftentimes small companies are more likely to be able to record their books on from the bank statement but if you're writing checks you're all you're going to certainly have some timing differences that you're going to have to deal with so keeping that in mind we're doing a full service accounting system we're practicing here so there's going to be differences then if I go back on over between the balance as of the end of January so we're doing as of a point in time we're looking at our bank statement as of a point in time that's why we use the bank statements and not just a running balance we have in our books the 8 8 8 10 25 on the bank statement we've got 61 241 85 so we have to reconcile those two things it's not unusual to have a different balance on our books than the banks if we have timing differences it would be unusual if we constructed our books directly from the bank feeds because then all the information on the bank statement should mirror what we use to create our books but that's not what happens in a full service accounting system we enter the traction transactions on our books when they happen not when they clear the bank and then we match them out to the bank and that's what we're going to do here and that means that where there might be timing differences those items which we know about that the bank doesn't know about the most obvious example being outstanding checks those have the biggest lag of a timing difference are related to them as transactions become more automated that those timing differences should be smaller and smaller but you could still you know have them if you're doing a full service accounting system that's the that's the general idea so let's go back on over to our tab here let's see where the bank recs are located i'm going to go to the tab to the left and go down to the accounting on the left hand side and then you've got a reconcile tab if you're under the business view by the way if you're in the business view the bank reconciliations i think are in the bookkeeping and then the reconcile so they're under bookkeeping and then reconcile okay so we've got this it says match the books to the bank records connect accounts are easier to reconcile connect now now note clearly any kind of online system these days has the capacity they're trying to they have the capacity to connect to the banks from a marketing standpoint they're gonna basically say hey look if you connect to the banks your whole accounting system is going to be a breeze it'll just be easy automatic that's not exactly true it's dependent upon the type of accounting system you're in but you can understand why if you're trying to sell accounting software they all basically say you know it's just gonna there is no thing is bank reconciliations anymore and that that gives rise to this idea of of the bank reconciliation isn't a thing anymore it is a thing it just might be done a little bit differently as we have electronic transfers and and the bank feeds so anyways keep keep yourself on track find holes in your accounting get things tidy for taxes whoa they got the little rhyme going there so reconcile like a pro get your books and your bank statements to agree i'm going to go to most reconcile okay so here's the reconciliation screen which account do you want to reconcile the typical accounts that we're going to reconcile will be the cash accounts and possibly the credit card accounts now note that the credit card accounts oftentimes don't get as much focus when when people are talking about you know how the accounting systems work but they're kind of they're going to be similar to cash you can imagine a system of course where you do all of your your payments through a credit card instead of the checking account and then you just pay off the credit card monthly so you don't get a bunch of fees and and that and then you can still have so you'd still be reconciling the credit card it's a financial institution that you can reconcile with however if you're using a credit card it's quite likely that you're going to be using electronic transfers and most small businesses that use the credit card are constructing their books directly from the feeds of the credit card as opposed to entering the transactions first and then uh reconciling to the credit card so therefore the reconciliation of the credit cards will usually be very easy such as a system where you're where you're constructing your books from the banks like that thing with a with a youtube revenue or something that you can construct your books from the banks that makes the bank reconciliation very easy okay but we're going to do the checking account here now the first issue we have this is the beginning balance issue is that the beginning balance may not tie out to what is on our on our bank statement beginning balance so we've got 30 000 at the beginning balance here and over here i have 25 000 why why does this happen well you'll recall when i when i entered the beginning balances into the quick book system we had to enter them i imagined we started whenever we start a new company file we're gonna have to pull the numbers in from the prior company file even if we started a new company file from scratch it's likely that we already had the bank set up or something and we had to put the beginning balance of the bank on the books now if you're pulling the numbers in from a prior accounting system i've got to use the cash number that is on the prior accounting system to put in the beginning balance in order to be in balance but that number might not match what's on the bank statement for the beginning balance because of outstanding items as of the prior period in our case december 31st 2022 so there's this beginning balance issue that we're going to have to deal with oftentimes and and what that that's going to be made up of again is the outstanding items as of the last time period so there's a couple different ways that we can deal with that i'm just going to recognize that it's a problem and then move forward with it from there now note there's also another problem that could happen you might have just a zero here for the beginning balance because you maybe you entered the beginning balance in as a journal entry as opposed to uh as opposed to like using the beginning balance function in quickbooks that's kind of okay as long as it ties out because in the first bank reconciliation you can just check off the beginning balance as something that's kind of cleared and just note that that's what you did for the first bank rec and then you'll be okay with that so it's not a big it's not a big deal if that's the case either i'll show you more what i'm talking about in a second here let's go to the ending balance date uh ending balance not date this is just the ending balance is 61 241 85 so it's going to be 6612 81.45 is that right right it's better when you have two screens 6124 185 okay and this is as of january 31st we're going to say there we have it and then it has down here enter service charge or interest earned now these are items that oftentimes we don't know about until we actually get the the bank statement meaning i wouldn't know if they charged me uh interest or if i earned interest or if i had a fee until i got the bank statement because they would just take the fee out of my bank and they would just give me the interest and i wouldn't know about it if i had bank fees i would know about it because it would flow through i would see it in the bank feeds and i would record it so more and more these two fields are becoming irrelevant i never liked using them anyways these will basically record the transaction as you go into the bank feeds i never use them because one most people have bank feeds so they've already recorded it meaning this would be redundant if you entered it twice it could it could cause you an error it's really a legacy from before the bank feeds and stuff and then two even if i didn't have the bank feeds it kind of confuses things i would rather see everything tie out and then i'll record any differences that are on the banks that's not on the books so let's go ahead and reconcile and so we're going to go into the process now this is the reconciliation kind of page or process that we're going to go through note one of the myth busting concepts that i had is the process of reconciling here is not actually the bank reconciliation so once we do this process and reconcile that's good it should give us a sense of assurance that we got things done but if you got audited or something like that they're not going to ask you for this page you know they're gonna add they're gonna ask you for the report that's generated from this page so and that will look something like this and so we're gonna have like a like the cleared balance which is in essence the bank balance right here 61 241 and that ties out to what is here 61 241 and then we're going to have any outstanding items these are the the outstanding checks and deposits the difference that will reconcile between what is here to what is on the actual books now this number 88 uh 645 25 which is the register balance in theory would tie out to what's on our balance sheet it does not yet because we're going to have to make some adjustments oftentimes when you do the bank reconciliation the general rule will be if there is something on the bank statement that isn't on our books so i'm going through here i'm checking everything off boom boom boom and i'm finding them over here on our books if there's something on the bank statement that's not in our books we're probably going to have to add it to our books unless the bank is wrong meaning if i saw like a a hundred dollar charge from the bank that i didn't put on my books unless i'm going to tell the bank hey take that charge off and even if i did they would take it off in the current period so i'd still have to record it unless it was wrong i would have to i would have to add it in my books which is generally the case if there's something on my books that's not on the bank statement then that might be because of a timing issue which would mean it's a reconciling item it's a check possibly that we wrote that has not cleared it's a transaction that we have entered we have knowledge about but the bank does not yet because it has not yet cleared and those will be the reconciling items and so those will be the things that are unchecked or undotted over here whatever you want to call the process of checking them off okay let's just let's just give a quick overview of what this screen is telling us it can be a little daunting to first look at we've got the statement ending balance this is the balance on the bank statement the 61 241 85 that we just typed in to the system we've got the the cleared balance which represents the beginning balance at this point in time which is just that 25 000 which is different than the 30 000 and that's one of our beginning balance problems and then you've got the little item down here the beginning balance minus the payments plus the the deposits that's what's making up the cleared balance so once these things are are the same the statement balance is equal to the cleared balance that's when we have reconciled and so this is showing the difference between the two over here so if i pulled out the trustee calculator i could just say okay what are you doing here what are you doing bank rec we've got the 61 281.45 minus 25 000 there's the 36 281 45 so in other words this is the beginning balance that we checked off and we're going to check everything off then down below so for example we're we have an error we have a problem here because this doesn't tie out but let's say that that did tie out and then i'm going to go down here and i'm going to start checking everything off like the expenses for example if i check off an expense that's going to be added up here and then the deposits if i check off a deposit that's going to be added up here now if i look at everything on the bank statement and i check everything off here and i verify everything down here deposits and checks then the beginning balance uh plus or minus the payments plus the deposits that have been checked off have to add up then to the same balance as the statement balance so i'm basically just double checking that everything's on the bank statement is on our books and then you might say well okay that's kind of redundant what's the point the point is that the things that we didn't check off are going to be the items that make the reconciliation so we're looking for those things that aren't the same the things that are on our books that aren't on the bank statement that are the timing differences if they're on the bank statement and not on our books we're looking for those two so we can fix them put them on our books but if they're on our books but not on the bank statement those are the items that are going to be the reconciling items on the report these unclear transactions so that's going to be the general idea here i'm going to uncheck these off let's just go through the rest of the data you've got the edit of the info this is the beginning balance the ending balance and you've got your starting information there you could save it for later finish now if you finish now you're going to force it to reconcile save it for later close without saving now notice you very rarely want to say finish now because what you're doing when you do that is you're forcing a transaction to take place if you're saying this difference is not zero and you're saying finish now then you're going to tell QuickBooks to force a journal entry that's going to that's going to reconcile the two the problem with that and you might say hey look what if i get this down to like five dollars if i get that down to five dollars i'm just going to force it to reconcile because i don't care if there's a five dollar difference between the what's on my books and what's on the bank statement or if it's off by five dollar whatever i'll just record it but the problem is that five that five dollar difference could have been due to like 20 deposits and 50 check forms right there could be a whole lot of transactions that just happened to net out to five dollar that five dollar difference that's that's going to be the issue so anything other than a complete zero over here lowers the accuracy of your internal control the bank reconciliation a lot and it should be really easy to get to zero because we're just going to we're going to force it to be zero right because we're just going to say the beginning what if there's something on the bank statement that's not on our books i'll just fix it on our books so i can check it off so it has to work out and it's got to work and hopefully i'll convince you of that as we complete the reconciliation but just note again like as an accountant if someone gave me their books and i'm just trying to say do i have confidence in this books being correct at all the fact that they have quick books gives me way more confidence than just a hand written income statement but if they have a reconciliation the fact that they did the reconciliation gives me a lot more confidence but if i look at the reconciliation and i see these these these uh these forcing it to reconcile things my my my confidence goes way down right way down even if it's only a reconciliation of a few dollars because again that few dollars could be made up of of multiple transactions and remember remember what the goal is the goal isn't to try to get this balance to be exactly double checked and correct i don't i'm not looking to see that balance as being completely right as of this point in time that's important but what i also want to do is give a double check of all the detail all these transactions those transactions are not only affecting cash they're affecting the other side of the transaction in the double entry accounting system because cash is the lifeblood of the company it's a huge internal control if we can double check all those we have a huge double check of those if we can get this down to zero because now we've known we know exactly what the difference is between the balance on the bank statement and our balance and if we know what that difference is i have confidence not only in these outstanding items which i'm going to want to double check to see if they cleared in the follow period but also we have confidence about all these other items down below okay enough with that so then down here you've got you can sort by you have your filtering options up top so you can find you can clear status you can you have the transaction type payee date and then you have the range that you can put up top we can also sort by date we can sort by type we can sort by reference number and so on and so forth and then we can also have these filtering options which are probably the most common in which we will be using we can sort by payments so now i can just look at the payments and focus in on just like this side of our bank statement we can sort by deposits and just focus on the deposit side to tie those out and we can sort by all of them which is the default and then you've got the the show show me around that's going to give you your little guides here and then you got your print option and your cog so you got the edit columns so i could remove some of the columns if they're not useful to us for example if the memo isn't doing much for me and i want to unclutter the screen maybe the maybe the type isn't really helping because i can see if it's an increase or a decrease and maybe that's enough or something like that the bank status or something you can shorten that up and maybe get it a little less busy of a screen which can be a nice tool so i'm going to put that back on though just so we could see the full range and then display density you got the regular compact and ultra compact so you could see more things on one screen possibly regular might be good for our practice problem purposes if you can also of course zoom into the screen but you've got this big top window so when i try to zoom in then i can't see many transactions so you can also change it down here and zoom out a bit and put it on the regular which which gives you a little bit more spacing between the transactions all right so that's going to be the the general idea of the bank reconciliation we'll dive into actually doing it next time when are we going to get down to the to the meat and the potatoes next time we start getting the meat and the potatoes no change has happened so we're not going to do any trial balance