 QuickBooks Desktop 2023 Bank Reconciliation Month 1 Overview. Let's do it within 2-its 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 get great guitars practice file we started up in a prior presentation going through the setup process we do every time maximize in the home page to the gray area view drop down we got the hide icon bar open windows list checked off open windows open on the left reports drop down company and financial looking at that P and L profit and loss I'm going to change the range just for the month of January this time oh one oh one two three to twelve thirty one two three customize in the report fonts and numbers changing them to fourteen okay yes and okay reports drop down again company and financials and we want to take a look at the balance sheet this time and we'll customize it once again for the month of January oh one oh one two three two oh one thirty one two three and then fonts and numbers changing the font bringing it up to fourteen okay yes and okay so now we're going to think about starting up that first month bank reconciliation we've entered data into our practice problem for two months and we're going to reconcile them back to back and the reason we want to do that is so we can put the reconciliations in one section and see the differences between reconciling on the first month and reconciling on the second month the first month you might have some problems with the bank reconciliation process unique unique to the first month and in the second month it should be pretty standard and be the same going forward into future months from that point so we've entered data into the system if I go to the home page we've done so using a full accounting system in other words we didn't create our data simply from the bank feeds or from the bank statements themselves you could do that in some instances that would be a more simplified accounting process but we actually enter the data using invoices sales receipts receive payments and so forth and then entering the deposits at the end of the revenue cycle and the payments at the end of the vendor cycle now of course the bank has their own transactions that they're entering on their side of things and we're going to tie out what we've entered on our side to what has been entered on their side that being the bank reconciliation so if I go back to the balance sheet then this balance right here represents where we stand in our data as of January 31st 2023 if I look at the bank statement which is we're going to be represented by this mock bank statement here we've got the summary data up top the beginning balance and notice there is a beginning balance and we're going to have to account for that and then we've got the additions we've got the subtractions and then the ending balance this ending balance then you would think would tie out to what we have on our books however if we're doing a full service accounting system it's likely that that might not be the case because of outstanding checks outstanding deposits and items possibly that we didn't pick up or possibly errors usually errors on our side but there could also be errors on the bank side as well so we want to come up with a reconciliation tying out what we have to what the bank has not simply to double check our cash but also to double check all the other transactions if I can do that I'm double checking all the detail here which will give us a double check on the other side of the transactions within the cycle so let's first start the reconciliation process so we can see what it looks like if we go to the banking drop down we can go into the reconcile item here banking and reconcile I'm going to be looking at the checking account if you have multiple checking accounts you can look at multiple accounts you may also reconcile the credit card accounts and then we're going to go down and say this is as of let's say a one thirty one two three now note here we have a problem the beginning balance is zero that doesn't tie out the idea of the bank reconciliation is going to be that we have a beginning balance of thirty thousand that must tie out for the thing to work and then we're going to say that all the additions are going to we're going to take them off and all the subtractions we're going to take them off which means we must end at the proper ending balance and anything that we didn't take off in theory will be outstanding outstanding checks outstanding deposits if I'm off on that beginning balance that's the unique thing to the first bank reconciliation that may be off depending on the process possibly because we started doing some banking before we started working in QuickBooks or we possibly had another accounting system and when we entered the data into our accounting system we did so with a beginning balance transaction which you would think might pull in to the beginning balance here but even if it did it would still be off a little bit so so I'm going to go back to that problem in a second the ending balance is going to be sixty one two forty one eighty five so we've got six one two eight one point four five as the ending balance six one two four one eight five six one six one two four one six four one okay I think I got at that time it's easier if you have a side-by-side screen of course or if you have it a paper document of the bank statement and then you've got these items for the service charge now we do have service charges and we have interest these are items that oftentimes we don't know about until we do the bank reconciliation and we can apply them out here but I like to actually go through the reconciliation and add them as needed when I do the reconciliation because I think that is easier to take and tie off so I'm not going to use those and that is it there now notice if you have an error in the last reconciliation then you're going to have to go back and undo the last reconciliation so you can get the next one right so in other words if you're beginning balance was wrong and it was not the first bank reconciliation but you've messed up on the prior bank reconciliation you might be able to undo the prior bank reconciliation right and then redo the process so sometimes that is necessary so I'm going to say continue and so here we have our normal bank reconciliation process the idea being that we're going to have the same beginning balance that's our problem right now and then we're going to be ticking off all the activity that has happened if it's on the bank statement over here then we should be able to find it on the books if it's on the bank statement and not on the books then typically we're gonna have to add it to the books unless the bank entered something in error which isn't typically the case it's usually the case like with those items on the fees as well as as as a interest that the bank is right and we have to add them to our books in order to reconcile if they're on our books but not on on the bank statement then they're going to be items that will not be checked off and we would expect items that that are towards the end of the month possibly not to be checked off because they're outstanding especially if we wrote checks we might see some checks and we will see in the practice problem that are outstanding those will be the reconciling items those will be the difference between the banks balance and the book balance during this process of reconcile lean we should be able to tie out the beginning balance if once we put the beginning balance in place and the increases and decreases and come out to the exact same checked off amounts and therefore reconcile to basically this number now that number will not then be what is on our books at the end of the day at the end of the day we're not going to end up with this number on our books although we might change our books slightly if there's something on the bank statement that's not on our books but will be able to check off everything to get to a reconciled balance up to this amount and the unchecked off things outstanding deposits and checks will be the reconciling items the difference between what's on the books and what's on the bank statement okay so let's go back on over and we're going to say that beginning balance problem you can see here that even if it put the beginning balance in place it would be for that 25,000 and you'll recall if I go into my let's go into the lists chart of accounts and when we set up the checking account if I right click and edit the checking account right click and edit the account then we we entered an opening balance when we started up the checking account remind me later of the 25,000 so so that so you would think possibly that within the reconciliation would have 25,000 but even if it did that's still not correct is not the 30,000 we need it to be 30,000 so the beginning balance would still be wrong so where it is now what we're going to do is we could say well I can always even if it's not in the beginning balance when it's the first bank reconciliation I can go into the reconciliation and just check it off right there and I could still be okay and I can note to myself okay I'll still be able to reconcile because I could still check it off I can't check it off as the beginning balance but I'll add it as part of the additions and I'll note that as my beginning reconciliation and I should be fine so I can take care of that problem but now I still have the problem that it's 25,000 and not 30,000 how did that happen that happened because when I took my prior bank accounting system I took that the balance that was in my prior accounting system on the trial balance and just entered that into quick books I couldn't enter the 30,000 because I wouldn't be in balance meaning this was my trial balance that I entered into the system as my beginning balances it had 25,000 on it that's why we entered it into the quick book system so my beginning balance was awful why is the beginning balance off the beginning balances off for the same reason that our ending balances is always going to be off there's could be outstanding deposits there could be outstanding checks that that we have to deal with so that's going to be kind of an issue with the first bank reconciliation if you had you know prior outstanding checks and deposits from the prior accounting system or something like that you're gonna have to basically pull those in and account for them within the current system when you start to reconcile so that's going to be the beginning or first bank reconciliation problem that often will be encountered now if I go back on over to the to the first item here I think we'll note we'll be able to see once we tick and tie all this stuff out that there's a difference 30,000 versus what's in our books and we should see some checks if it was outstanding checks that didn't clear last month that will clear this month so you can see this this right here you would expect that that might be the difference right there from checks that clear so the the problem will actually work itself out and there's a couple ways that you could still be able to reconcile with it in there but we'll talk more about that in the future in essence I'm going to suggest that what we would want to do to fix that is enter these checks into the system because they cleared in the current period even though they weren't entered in the current period they were entered in the prior period which is typically done with the prior bank reconciliation but I would like to enter the prior checks into the current system so that I can account for when they cleared and so we'll talk more about that when we when we when we get to the end of the first month bank reconciliation but that's going to be one of the major kind of things that we want to consider so once we have that if I have this beginning balance tied out then if I get this beginning balance tied out and then account for that other 5,000 then I could say okay that beginning balance is correct and then I can check off all of the deposits hopefully these deposits will be clearing the the bank statement in the right grouping and also note I can hide if I hide up here I could see some trans I could see just the transactions that go up through January I shouldn't need any transactions in February because if I enter the transaction in February there's no possible way that it could have cleared the bank in January so that so we can basically usually cut that off and just see the detail up in the month that we're basically working in it is possible however to have something on the bank statement that that that didn't clear so in other words it's possible for us to have entered something in January that didn't clear the bank until February so in any case if I looked so notice a grouping of this of deposit over here there's the deposit right here so we're just going to tick and tie everything off and if I look at the check side of things then we're going to have the checks here or the decreases 16 and we can take and tie those off to here as we start to check these off you'll see the balances down below changing so let's just kind of recap this whole screen we've got we've got the periods we've got the checks and payments on the left these are the decreases we've got the deposits on the right we've got the the highlight marked items we could mark all of them so this works quite well if you are using the bank feeds to basically create your books then you still want to do the bank reconciliation and you can essence in essence just mark everything off and it should tie out if it doesn't you got to go through and check it all off but it might tie out because you created your books from the bank statement however if that's not the case then that's usually not going to work I can unmark them all in this way as well down below I have the beginning balance once again that should be you would think 30,000 if it was a normal non first month transaction but here I'm going to check off the 25,000 as the beginning balance which will be included in the increases or deposits and I'll have to figure out what happens with that other 5,000 which was the outstanding items for the beginning of the month we'll talk about later and then we've got the checks and payments so these are going to be if I tick and tie these out we'll see the activity here at the end of the day if this was perfectly tying out we would have then the beginning balance of 30,000 the additions 143 after I check them all off and then the 111892 should be basically mirrored down here and if that's the case this difference over here will be zero and it has to work so you want to make sure that when you're going through this process you're going to say well it has to work if my beginning balance ties out and I checked everything off then the ending balance has to reconcile if it doesn't then I got to fix something right and then I'll go in and fixed it then we've got the the ending balance here and this is the cleared balance now these two are going to be the same which will reconcile to zero note that the cleared balance is does not represent what's on the balance sheet the cleared balance does not represent this balance the cleared balance will be then the ending balance of the 61 241 to reconcile it will still be different than what's on our balance sheet because the items that we did not check off in here we're going to assume are outstanding outstanding checks outstanding deposits checks deposits that we made that have not yet cleared the bank those are going to be the reconciling items quick books will then make the reconciliation report which will show those items as the difference between what's on our books and what's on the banks books if we get that amount exact meaning this to be exactly zero then we have a very good internal control if this is anything other than zero even if it's like a dollar or two dollars you're like you know I'm not worried about that in terms of my bank balance I don't care if I'm missing five dollars or whatever a thousand dollars whatever but it's not about the bank balance if you're missing a thousand dollars or five hundred or two dollars even that could be because you're not accounting for multiple checks and multiple deposits so it's not about the ending bank balance it's the fact that if you haven't entered those multiple checks and deposits not only is your cash balance not reflecting that detail but also if I go to the homepage the other side of the transactions the vendor cycle the customer cycle the employee cycle is not reflecting that because the double entry accounting system has two accounts affected so so if you have anything other than zero on the bank reconciliation your level of of internal control the use the need the requirement of the reconciliation goes way down and you you should be able to get it to zero because it has to work right it has I mean you at the beginning if the beginning balance is right and you take everything off the exact numbers here to what's on your books it has to work and if there's a difference then you figure out what it is and you fix it okay so that's the general outline the general overview we'll go into it step-by-step in future presentations