 Hello, in this presentation, we will enter adjusting entries related to the bank reconciliation process for February into our bookkeeping problem in Excel, keeping in mind how that same information might be input into accounting software such as QuickBooks. We will first take a quick look at QuickBooks and then move to Excel. When considering Excel or QuickBooks, what we are doing within the bank reconciliation process what we have done in a prior presentation is compare the bank statement to the books and look for those items that are not matching are not tying out. Items that are on the bank statement that are not on our books are items that need to be adjusted for. As we do that in QuickBooks, typically we'll do that in the same point in time meaning we had a withdrawal and a service charge on the bank statement not on our books. What we're going to do is just enter that into our books. We go to the register. We're going to say here's the $100. We're going to say it was an owner draw in the register decreasing our cash account recording the other side to the owner draws. Then if we jump back to the bank reconciliation we just adjusted that we fixed our books and can now check it off on the bank rec. Then we can do the same thing for the service charges the $20 the bank service charges and yes this is just a quick example we'll see this in Excel and see how we'll deal with this in Excel and we'll then be able to jump back this is adjusting the bank balance we'll be able to jump back and just check it off in our bank reconciliation and after we do that then we can reconcile the only reconciling items then being the outstanding checks and deposits. Let's take a look at this process in Excel. Last time in Excel we entered a bank reconciliation for the month of February reconciling the checking account. We're going to go over and see the reconciliation at this time so we're going to scroll to the right scrolling all the way to the right till we get to our bank reconciliation and it's going to be all the way we see this is the January bank reconciliation we want to be in February so the one right next to it is the one we are currently working on it's in columns EM through FE EM through FE. You'll recall that we did the bank reconciliation we tied everything out and we have these adjustments that were on the bank statement not on the books those of these two items here this $100 withdrawal and the bank service charges these are items that the bank we didn't realize that were there until we got the bank statement and now we're saying hmm we're not gonna get that money back we're gonna have to actually adjust our books for those amounts. We show that over here in the bank reconciliation as is typically done in most book problems where we have the bank book balance here's our beginning book balance and then we have our two adjustments the withdrawal and the bank service charges in essence what we need to do is make our our ending balance adjust for those two meaning we need to include those two decreases so at the end of the day we're gonna have two more items here on our bank reconciliation there's gonna be a hundred dollar decrease and a $20 decrease and if we were to to copy this down then then we would have our adjusted balance here which would match that out so we actually need to fix this item rather than just reconciling it here once we do that then this will be our reconciling item what we'll do is then journal entries in order to do that so we're gonna make a journal entry for the withdrawal we're gonna make a journal entry for the bank service charges we're gonna do this with two separate journal entries we could combine them but we're gonna do them with two separate journal entries we're gonna say that the withdrawal something that was taken out of the bank and we don't know exactly what it was for but we suspect that it was for personal use this time and therefore rather than putting it to miscellaneous expense we're gonna put it to a draws account and then the second one's gonna be a bank service charge so it's gonna decrease cash and we are going to enter the other side of that to be an expense of bank service charges so let's do that now we're gonna go all the way to the left to get to the general journal so we're just scrolling left we're taking a scroll all the way to the left and we will enter our adjustments all the way over here it's gonna be as of the end of the month so we're gonna say as of 228 we're in cell u15 u15 is something happening to the checking account yes we're gonna say it's gonna go down we're gonna say it's gonna go down first by that withdrawal that $100 withdrawal so we're gonna copy the checking account in a j5 right-click and copy we're gonna put that on the bottom because we will be crediting it in v16 right-click and paste 1 2 3 we're then gonna format that gonna go to the home tab alignment and increase the indentation we will have a credit it's gonna be in x16 of negative 100 we're then gonna debit something for that same amount that $100 we just need to know what that debit then should be and we're gonna say that that 100 was taken out for personal use and therefore we're not gonna put it into some type of expense but instead into the draws so the owner took money out of business for personal use shouldn't be decreasing net income then it should just be taken out of the equity section so we're gonna go ahead and decrease or increase dark draws decreasing equity and note that's a little bit confusing for us to first wrap our head around what is a draw and how does it affect affect the equity section remember the equity section has a credit balance you can think that draws are kind of like a contra equity account meaning they're gonna be an equity account with a debit balance which is contra to the norm or the winning accounts in the equity section which are credit balances and that's because it will bring down total draws so it acts like an expense in terms of total equity in that it goes up in the debit direction brings down the total equity balance but it's not part of the income statement it's not something that's going to be calculated in the calculation of revenue minus expenses it will be decreasing however total equity so let's go ahead and record that it's gonna increase in the debit direction so we're gonna copy the draws we're gonna put that on top in v15 right-click and paste 1 2 3 we're gonna go ahead and post that out now we're gonna post the draws first so in order to do that we're first gonna freeze the pains scrolling up putting our cursor in a j1 we are in a j1 then we're gonna go to the view tab up top we're gonna go to the windows group within the windows group we're selecting the freeze pains and the freeze pains then we're gonna go to draws draws is going to be our first light blue or equity accounts in order assets liability and then equity then we'll scroll to the right until we find that equity account here are the asset accounts here are the liability accounts and orange here are the equity accounts we're looking for the equity account of draws there it is we want to be in cell BG 15 BG 15 we're gonna select equals within BG 15 and point to that $100 which should bring this balance up from 0 by 100 to 100 that same 100 then should be on the trial balance scrolling all the way back to the trial balance to see if that is indeed the case there it is now note that that is decreasing equity because if we take the total equity this is going to be a debit that's a credit and if I highlight all of that that's all equity and it has a credit balance of 158 47 therefore that debit is increasing that total balance however it's not part of the net income calculation here next component will be the checking account there's our checking account here here's our checking account there we're bringing it down we're gonna find that checking account on the general ledger here's the general ledger we want to be down here in a in 18 and 18 a in 18 we're gonna select equals and then point to that $100 that will bring the balance down from 99 117 down by 102 99 17 that balanced then also found here 99 17 and we should be back in balance down there looks good next item now we're gonna record the service charges that was a $15 service charge the bank just took out of our account we're gonna say okay we're gonna have to record that on our side we're not getting that back so we're gonna say it's 228 the checking account here is gonna be going down that's a debit we're gonna make it go down doing the opposite thing to it a credit so we'll copy that we're gonna put that on the bottom right click and paste 123 gonna go ahead and indent that go into the home tab alignment increase the indentation we will have the dollar amount the dollar amount is $20 is $20 for the bank service charge and then we're gonna debit something for that same amount at the $20 of the bank service charge and what will that debit be it's gonna be some type of expense I typically like to put it into an expense called bank service charge although the amount is small at $20 and some companies might put it into some other accounts such as miscellaneous or some other grouping that's gonna be on the decision of the bookkeeper we note that all the expense accounts are debit balance accounts they only go up in the debit direction and therefore we will increase the debit balance expense account with another debit so we're gonna copy the bank service charge we're gonna put that on the top of our journal entry in the v18 right click and paste 123 here is our amount here on the journal entry we need to now post that to the general ledger here's where the account is on the trial balance it's gonna be in the same order on the general ledger let's locate that now we have the assets first on the general ledger then we have the liabilities and then we have the equity we're looking for the bank service charges I believe they're on the bottom they're down here in BK 39 BK 39 what we're gonna do is select equals scroll up just a bit and point to that $20 let's do that now we are in BK 39 we're selecting equals we're scrolling up just a bit and pointing to that $20 enter there's the 20 there's the balance of 20 that should also then be on the trial balance let's check and see if it is back on the trial balance there's the 20 we're out of balance by 20 we see net income went down by the 20 now we're gonna record the other side the checking account that's of course our first account on the trial balance and also the first account on the general ledger we'll scroll down to that first account we are in cell a in 19 and 19 a in 19 selecting equals and pointing to that $20 bringing the balance down from 99 17 to 98 997 so this is gonna be our new balance we basically made an adjustment that 98 997 here also we are in balance there and that 98 scrolling back up scrolling back up that 98 997 then is our new balance that we have adjusted due to the bank reconciliation process so if we go back to our bank reconciliation we can see what we have there we're gonna scroll all the way back keeping in mind that 98 997 scrolling all the way back to the bank reconciliation taking a scroll to the right taking a scroll to the right till we find the bank reconciliation here's the January one we want the February one so we're all the way back over in cells or columns em through something like fb and if we go back over just a little bit we see that here was our adjustment we started at this 99 116 which was right there and then we made these two adjustments saying this is what we need to do to get to our ending balance of 98 996 we have now done that we've made those adjustments we've decreased the checking account so really we're actually here now this is our new balance that is actually our balance so note that this portion is now somewhat obsolete it's no longer valid because our balance as of the end of the month is now this amount it is the ending balance and that means that the bank reconciliation as it is in something like QuickBooks is really just this half of it because we made the adjustments we need to make therefore we have the bank balance here we have the outstanding items are just going to be the outstanding checks and deposits and that will give us our adjusted balance and if we if we examine that one more time the blue accounts remember are that beginning balance and then we tick and tide everything out so all of these I'm gonna make these green when I like these because we found a home for those make those green all of the items here the 14 and the 24 we marked off we tick and tide them out we said those are we found all those and therefore they're good and that means that if that's the case if we found all those then the ending balance has to be the same so we're saying here's the beginning balance and we're tying it out to these two items which are the beginning balance and blue these two items in green then has to end at the ending balance of the 99 to 296 the only difference are those amounts on our books that we wrote in February that aren't on the bank statement and of course those we expect to clear in the next month those are the reconciling items those are the outstanding checks and outstanding deposits