 QuickBooks Online 2023. Bank reconciliation month number two, checks and account decreases. 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 opened the free QuickBooks Online sample company. You can open the two at the same time using the incognito window or another browser. You can open incognito if using Google Chrome by selecting the three dots in the browser, incognito window, type it into the search engine, QuickBooks Online Test Drive. 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. 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. You can change between the two views by selecting the cog up tops, which the view down below. We're gonna open a couple tabs or duplicate the tabs as we do every time, right-clicking the tab up top to duplicate it, right-clicking the duplicated tab to duplicate it, going back to the tab in the middle so we can go to the reports and then opening up the balance sheet. By the way, if you're in the business view, the reports are located in the business overview and then the reports. Okay, back to get great guitars tapped to the right, opening up the reports. And this time the P to the L, the profit to the loss, the income statement closing up the hand buggy, change in the range from 010123, to 022823, month-by-month comparison, run it to refresh it, tab it to the middle, close the hand buggy, scroll up to the top, change the range 010123 to 0228, to that's not a 28, 2823 and then change to months and run it to refresh it. That's the set of process we do every time. We did a bank reconciliation in prior presentations for January. We're now working on the bank reconciliation for February. This is our register balance. This is the mock bank statement that we are using. There's the bank balance. Let's also open the prior period bank reconciliation so we can see those unclear items from the prior period, tab to the right, right-click it on the tab to duplicate and then we can go to the reports on the left-hand side, reports, closing the buggy and I'm just gonna type in reconcile for the reconcile reports and that actually takes us to the cookie trail of the chart of accounts, bank register history by account. This is the prior bank wreck we did last time. We had the report of this being our book balance as we can see on the balance sheet. I'm sorry, this is not the book balance. That is the statement balance. As we can see on the January bank wreck or bank statement and then we are reconciling items to get to the register balance, which is on the balance sheet. And those are the differences. Those differences then are down here so we see the detail of the unclear checks. We would expect most of these that didn't clear in January so we'll see those timing differences come through as we work on February's items, which we'll do now. Tab to the left, let's go down to the accounting on the left-hand side to open the reconciliation. If you were in the business view, by the way, then it would be under the bookkeeping tab on the left and then you've got your reconciling items and then in here, we're gonna go to the checking account. Notice that up top, you've got your summary information and your history. That's another way that you can get to the reports that we looked at to open up the bank reconciliation for the prior period. Resuming, resuming, closing up the hamburger. This is the recap up top. That's the statement balance that we entered into the system as we can see there. And this is the cleared balance, which does not match but should at the end of the day, this cleared balance is made up of the beginning balance, which of course is this balance for the February statement, the same as the ending balance for the January statement. And we worked on the additions last time, which were the 51, 981. And I think those check off to here, there they are, 51, 981, 20, right? That's what they are. Don't forget those pennies. And then we've got, now if I just get the payments correct, we should be good to go. We're off by 11, 633, which happens to be the payment amount. So everything looks like it's going like it should. Now we have to do the most difficult part though, the payments. Remember what we have on the bank statement to help us out with the payments is if we wrote checks, then we're gonna have the check number to help us out. We'll have the amount, but the date will not be as relevant because the checks could take a long time to clear. The date represents the clear date, not that the date that we wrote them. If we had transfers of some kind, then the date will be more relevant, even if we're using a full service system, even if we're not entering the items into our system based on the bank, but there still could be some timing difference. And then we would have the amount and we might also have some information in the memo, which might indicate things like the vendor. If we constructed our books from the bank using bank feeds, then it's gonna be a lot easier than it'll be really easy because this stuff should tie out exactly because we made our books from the transactions. Many small businesses, by the way, might structure their system where on the payment side of things, they can basically be automated using the bank in order to record the transactions, but might not have the luxury of doing that on the deposit side of things due to the nature of their business. But here we wrote mostly checks, so we're gonna have these timing differences we'll have to deal with. We're always gonna go from the bank statement to the books because it might be on the bank, if it's on the bank statement and not on our books, we're gonna have to fix our books, most likely unless the bank is wrong. If it's on our books and not on the bank statement, that is quite likely if we have a full service accounting system because we're gonna have those timing differences. Okay, we're gonna look for this one, check 1012, we got 3572, let's find it. So 3572, I'm gonna look for just the payments now. I'm gonna sort it by, I believe, date is the default and I think that's the best thing to go with here. So there's the 3572. Notice that this check was written in our system in January. It didn't clear in January. I could see it here as an unclear item on the prior bank reconciliation, which is now clear and in February, which is what we would expect for those items. Let's check that one off. So I'm gonna go do, let's check it off. And then we've got 410 on 1010, or that's the number, there's 1010. There's the 410, also we wrote that in January. So if I look at the prior bank rec, there's the 410, that looks good. So that clear this time, that's what we would expect to happen generally. We've got the 185640 in the numbers 1013, so 1013. And here we've got 185640, is that the same number? 185640, is that what we had here? Yes. This one also was written in January, so that would be over here as one of the unclear items last time, which is now clearing, good. Movie B to the end, everything is going as planned. And then 1015, 200, 1015, 200. So there's the 1015, there's the 200. Also one that we wrote in January. So it was unclear last time, now it's clearing. That is, everything is going as you would expect with those unclear items. There's the 130, 1014. So 130, 1014, boom. Also one we wrote in January. So last time it was unclear, now it cleared in February, February clear. So let's make that one. 1016, 1358. So 1016, 1358, 73, boom. That one was written in February, so now we're actually on the same month. It was obviously we wrote it before it cleared, but we're in the same month in terms of the timing difference. Then we're on 180, 1018. So 180, 1018, that one looks good. Okay, let's check it off, check it. And then 468, 77, 1021. So 1021, 468, 77. So I think that is good. Let's check that off. And then we've got 1856, 40, 1023. So 1023, 1023, 1856, 40. So 1856, 40, okay. And then 1080, 1024. So 1024, 1024 is that, 1080. Okay, so I made an error here, which was totally on purpose, by the way, but let's check it out. So now I can say, okay, there's 50520, which are items that I know I don't have on my side. So they're on the statement, but they're not on the book. So that means I'm gonna have to add those to my books. So I would think that if I added everything else, I would have a difference of 520 at this point in time. I should have a difference of 520, but I have a difference of 580, or another way I can look at it, I just entered, I just checked off this 11053, minus, if I look at what the total is over here, it should be minus 11633. So I'm off by 580, and I would think I would only be off by 500 plus 20, or 520. So if I say the difference between 580 and 520 is $60, I can go in here and say, okay, what in the world happened? K the heck Paso this time for goodness gracious is sake. There's a $60 amount. And you'll recall that we did that kind of thing where I had an error in the payroll that I said was gonna pop up if you were following along in this long practice problem. That's why I put the same check number. So this one that was 3, this check number 1012 was actually 3512 didn't tie out to here. I was wrong. So it's really 3572. So notice if you're going quick, you might say, I'm just gonna reconcile anyways. I'm off by $60, whatever, right? You might force it to reconcile, but you don't wanna do that. You wanna get it exact because you're gonna end up with the kind of these issues. I can say, because I should be able to figure out exactly what the difference is. So I'm gonna like, okay, there it is. So that makes sense. Now I'm off by 520. I'm off by 520 because I have to add these two into the system, which I will do now. So I'm gonna close this back out. Let's say, let's leave, save this for later and let's do what we gotta do. Adding those two and then we'll be back. I'll be back. So we'll go down to the accounting on the left. Let's go into our chart of accounts, close up the hand bogey and then we'll go into the check register to add them. So now I'm just gonna add these in here. I'm just gonna go, okay, let's do this. Drop down, let's make it an expense type of item. I'm gonna make them both as of the end of the month. So I'm gonna say 022823 and one was a draw. So I'm gonna say owner draw. And let's, because this is the vendor owner, I'm gonna say this was a draw and 150, that was the amount last time I was trying to memorize. But this time it should be 500, 500. So let's make it 500. And last time we went to miscellaneous. So remember kind of the issue we have with pulling money out. If money comes out of the business, if you pull cash out of the business, whether you're doing your own bookkeeping or especially if someone else is doing your bookkeeping, then you typically want that to be the case because you're taking it out of your business for yourself, for your draws. So I can see that and see it as a draw because if you're taking money out and then spending on stuff that's for the business, then we have no audit trail for it. And if it's a legitimate business expense, we want an audit trail, which is easy to do these days by simply paying with anything but cash, right? You wanna pay cash for the stuff that we don't want an audit trail for like your personal business, we don't really need an audit trail for that, right? So you pull the money out and then you go to Disneyland or whatever you're gonna do with it. But if it's gonna be pulled out for cash or if it's an expense for the business, we would like to have an audit trail and you can think taxes for that. For example, if you got audited, you'd like to be able to say, hey, look, I have an electronic transfer that I paid for something that's business related right there rather than having to go through a bunch of receipts to verify cash type of transactions. That's the general idea. So that's what we'll do last this time. If you, however, are pulling money out for business transactions, and sometimes that might be a legitimate thing because you might say, well, cash goes further for certain transactions. If I'm tipping someone or something like that, I'd rather give them cash so that they could maybe that'll go a little bit further for them on their side or whatever. But the general rule is we'd like to have the audit trail. So when they pull the money out, if I could say it's a draw, remember the difference. If they pull money out and we record it as an expense, it's gonna be on the income statement, lowering net income, which is typically good for taxes. But if you've got a whole bunch of stuff and miscellaneous expense, for example, the IRS might get suspicious. Think of that as a red flag and question you about it possibly, right? And if you put it on the books as on the balance sheet as a draw, it's gonna, as we'll do this time, it'll show up down here. We'll not hit the income statement because you are now the owner. Basically, this is kind of like a liability account to you, the owner, and you're pulling the money out for yourself. Now, if it's a corporation, then you're gonna have dividends and the dividends have to be agreed upon by the board and so on and the management in order to distribute the dividends because they all have to be the same. But if you're a partnership or you're a sole proprietorship, then you might have more leeway in terms of the agreement with a partnership or obviously if it's a sole proprietorship, you have the leeway to take the money out in the form of the draw. Okay, so that's what we're gonna do here. We're gonna call it a draw. So I wanna make another account here or see if they have a draws account. Let's see. Draws. So here we have one owner draws. So they gave one for us. It's an equity account. That's the key. So if you set one up yourself, if you need to set one up, it's gonna be an equity type of account. I'm gonna say, okay, what's this gonna do? Decrease the checking account. The other side's gonna go into the equity for draws. Gonna record it, save it. Let's check it out real quick. Balance sheet, run it. We're now in February, February. And if I scroll down, we had the draw of the 500 hundo, the 500. And then the other side is down here in the equity section in draws. It's a contra equity or a negative equity, reducing equity. Now note that this owner's equity account is the account that was originally retained earnings, the account that we're gonna roll the income statement into. And it's gonna close out, like income is gonna close out to the equity account. Now in traditional accounting, the closing process would also close out investments, your personal investment into the business and draws the money coming from the business to you that you took out of the business into equity periodically, say yearly. But QuickBooks doesn't do that automatically. So if you don't roll these over with an adjusting entry, not a big deal, they'll just be hanging there all the time. But just remember that these two accounts, if you don't close them out on a yearly basis, represent investment and draws over the lifetime of the business. So just something to kind of be aware of. All right, let's go back on over and let's do the other one, which is gonna be on 228. This one's is gonna be bank fees. I'll just go bank fees, $20, 20 buckaroonies, $20. And we're gonna say it's the bank fees and service charge, just like last time. So there it is, save that. Now, if we had bank feeds turned on, that would be done automatically for us. So we're gonna go up top, checking account has changed. So if I run it for Feb, the month of Feb, then we scroll down, we've got the checking account has now the expense of 20. Here they put it up there for some reason. And the other side is now on the income statement. And I have a statement about income here. I would like to make a statement about the income. And down here, what did we record it as? Bank fees, there it is, 15 and 20. They upped the fees this month. What is going on with my bank? Inflation, whatever, whatever. Let's just keep reconciling. I'm gonna go back to the left, open up the hand buggy, back to our reconciliation process, which is under the accounting and chart of the accounts. Close in the hand buggy, not chart of accounts, back. Oh, what in the world? We're gonna go into accounting and reconcile. Pull it together, pull it together. Cash, resume, reconciling. Okay, so the last two we need to check off is the $500, not that one. Just happens to be the same amount, be careful. We want this one, no. They happened on 228. There they are, the 20 and the 500. Whew, all right, be careful. So those are the two. That puts us in balance. We're good to go. Notice that we could make a mistake. I could have hit the wrong one, the wrong 500 there. So you wanna be careful. It's possible to do little errors like that. So it is what it is. So we're in balance now. If this is anything other than zero, you haven't done your job because you could figure it out exactly. And if there's a problem that's on the bank statement that's not on your books, then we could just fix it and we can make it right. And then if it's not right, then you're only cheating yourself. You're only cheating yourself because you could have multiple transactions that make it off by like a dollar. And that means that the other side of those transactions that are involved in the other flows are gonna be messed up too. So the bottom line is we're in balance at this point in time. This mirrors what is on our bank statement at this point in time in terms of the summary up top. This matches out now. So we're good to go. The ending balance ties out for the cleared balance. That cleared balance, however, does not match what's on the books. It's still difference. There's still a difference. The bank reconciliation report will show that difference which is represented by all the things that we didn't check off, which we're not totally concerned about yet because we can see if they cleared in March we're okay with them. They're legitimate transactions. They're just timing differences helping us to reconcile, helping us by reconciling to verify all transactions through the checking account, which helps us to not only verify ending cash balance, but all the transactions that the flow, the blood flow of cash through the business is touching all the other cycles. Now we're not gonna hit the finish button yet because we're gonna do the reports next time. So we're gonna hold off on that. Again, try to hold off and then we'll do the reconciliation report and take a look at it in the following presentation.