 QuickBooks Desktop 2023. Bank Reconciliation Opening Balance Problem. Let's do it within two-its. QuickBooks Desktop 2023. Here we are in QuickBooks Desktop. Get great guitar practice while we start it up in a prior presentation going through the setup process we do every time. Maximize on the home page to the gray area. The view drop-down hide icon bar open windows list checked off open windows open on the left. Reports drop-down company and financial looking at that P&L. We're looking at you P&L. Let's do it just for the month of January 010123 to 013123 because that's where the bank rec will be. Let's customize it up top and then go to the fonts the numbers to change them to 14. Okay yes and okay. Reports drop-down again company financial again this time however balance sheet balance sheet report customizing it for the month of Jan 010123 to 013123 that's the month of Jan fonts numbers changing to 14 and okay yes and okay. So that's the setup process we go through every time we've been doing the bank reconciliation for the first month that we have done bank reconciliation in this QuickBooks file recalling that the bank reconciliation is tying out the difference between our balance here as of a certain date January 31st to the bank balance that we get from the bank statement and here we have that difference that difference isn't going to go away although we might have some changes such as we adjusted for these two items that were on the bank statement but we're not on the books however if they're on our books but not on the bank statement we expect that that might be due to outstanding items and those outstanding items will be then the difference we're focusing in this time on this beginning balance problem that often happens with the first bank reconciliation and then after that going forward not a problem any longer to get into that in more detail let's open up the bank rec again banking drop-down reconcile down below it's January 31st notice there's no beginning balance here and I'm not worried about that because I can check off the beginning balance for the first bank rec and just include it in the activity and add it into our calculation in the same way so I am concerned however that even doing that we still have another beginning balance issue this is the ending balance I'm not going to put the service charges or interest we're just going to continue here and you could see that in prior presentations we checked everything off and we actually have no difference here meaning we can reconcile but we still have that beginning balance issue let me explain so normally you would have the beginning balance here which would tie out to our beginning balance on the bank statement it we don't have that beginning balance in QuickBooks because it didn't show up because it was our first opening balance we entered into the system but we do see it up top here so I could check it off here and it'll just be added to like the deposits and I'll just note that as part of my beginning balance that's one of the issues with the first bank rec that we should not have going forward on the second bank rec going forward also note that that 25,000 is not matching up to the 30,000 that's on the bank statement that's the other beginning balance issue that often occurs note that if it did tie out and then we checked off all the additions right here if I checked off all the additions over here I'm going to hide everything that's beyond January if I checked off all the additions not including the ones that aren't on the bank statement and if I checked off all of the deductions including or adding to our books anything that's on the bank statement that is not on our books including these two items then that would add up to we'd have the same calculation here beginning balance plus additions minus the subtractions that we have in quick books and we should result in a clear balance that will match it has to work it has to it has to happen although that doesn't mean that our bank balance is the same as the book balance because these ones that are unchecked are the outstanding items so now we've got the we've got the issue however of this 30,000 not matching the 25,000 in our books why is that the case because when I entered the beginning balances this was our beginning balance worksheet and had 25,000 on it so I had to enter into the checking account the beginning balance of 25,000 in order to be in balance but if we had if we were reconciling in our prior accounting system then there might have been outstanding checks and deposits that are included in our book balance as of in our case the end of December our beginning balance for January that had not yet cleared the bank last month and we have to pull those in to our bank reconciliation now if those things actually cleared in the current month so they they were outstanding last month they cleared in the current month we'll see them cleared right here so there they are cleared if they don't clear then we're not going to see them cleared and we'll have to deal with them in that case as well but if we see them as cleared that's why we're in balance because that 30,000 added deposit now is including these outstanding checks that we wrote in the prior accounting system prior to the cutoff date when we started our new accounting system in our case in December of 2022 possibly and then they cleared the bank in January so there's our timing difference so I could just say okay whatever I'll just note that right there and I'm in balance because I can because I'm okay right here those two things net out that item here and the fact that I didn't check off those two items over here and I'm good to go but that's not really the most transparent way to see it because if you actually then analyze this bank rec later you probably aren't going to be able to explain exactly what happened so in order to clear them and see them cleared it would be nice for us to find those two checks in the prior accounting system and then enter them into our current accounting system and then mark them off as cleared so if I looked in my print notice I can find the checks right here but I probably don't want to use I certainly don't want to use this date because this date is the date that they cleared the bank I want to look at the canceled check or I want to look at the prior accounting system and see what I entered into the accounting system and enter them as of December and then fix my beginning balance in the cash account to account for those items so that I can then show them as having cleared in January so let's see what that looks like so I'm going to go back on over and I'm going to say let's go to my my account let's go to my banking and use register I'm going to enter these into my register now I have my beginning balance up here of the 25,000 what I'm going to do is I'm going to be putting these these checks in place that are going to be a $5,000 decrease before December or I can put them in before December and then I'm going to adjust this to 30,000 so it'll be the beginning balance it'll net out to the same number it won't throw out off our beginning balances but that beginning balance will be netted out from these from the activity of the checks and that beginning balance amount so I'm gonna imagine we saw that the check was entered into our system as of 12 25 21 last year before the cutoff it cleared the bank in January but we were imagining we entered it into the prior system as of that date I'm not going to put a check number on it for the for here I'm gonna say it was for epiphone so now I can determine who the check was written to as I see if it's clear so it's in the activity here and then I'm gonna say that that was for 4,000 let's say that matches out to this cleared amount that 4,000 right here cleared on 9 1 but we wrote it on 12 25 last year and I'm just gonna take the balance to opening balance equity opening balance equity to net out against against the beginning balances that I put in place I'm not gonna put it I probably bought like inventory but I'm not gonna record this to inventory because that's my inventory vendor I'm not gonna report it to inventory though because I've already entered my beginning balances for inventory and the amount that was owed to epiphone at that time the only reason I'm entering this is to see the activity for epiphone to track that the cash cleared and see that the cash cleared and to get my checking account reconciliation for the first month accurate so I probably should put a memo like outstanding check from prior prior accounting accounting system right that was an outstanding check from the prior accounting system that I have to account for here so there's one of them and then the next one I'll imagine we entered another one let's just say it was on the 26th so we'll imagine this was entered on the 26th I have no check number for it I'm gonna say this was for Gibson USA which again is another vendor we usually buy inventory from $1,000 which mirrors this amount so it cleared on January 8th but we're imagining we wrote it on 12 26 and then I'll put this to opening balance equity and this once again is a check from prior accounting system so there we have that so now those are in place if I scroll up to the top then I put them in there as of 2021 I should have put them as a to let me change it to 2022 sorry about that 2022 is that what I want in there and then yes and then this one let's say that's 2022 okay and then so so those are all in there before the January 1st 2023 cutoff now I've changed those two I'm gonna change this one now to 30,000 so I have 30,000 here minus those two checks gets us to the same beginning balance I'm gonna say 30,000 on this one and then okay and just so you can see that that didn't mess up our beginning balances let's go to the reports drop down and go to the accounting and taxes look at our trial balance and we first entered these in as of 12 let's make it 12 31 let's make it we'll say 12 31 22 12 31 22 so there's the beginning balances we entered in place there there's my 25,000 in the checking account which ties out to the beginning balances we entered at the beginning of this practice problem we just broke it out into a 30,000 opening balance and then the other the other side going to those two checks and then it washed out here in opening balance equity so if I go into opening balance equity we're still at zero in opening balance equity so that was used as kind of like a clearing account to net those two things out and so now we have the same beginning balances we just basically now have that beginning balance in the checking account of the 25,000 so now if I go back into my reconciling I can say okay now I can check these two off this one's checked off at 30,000 which makes us off by 5,000 which is what we would expect so now if I go back on over here I can say okay I've got the 30,000 now that looks good these two I checked off completely except that I didn't have this 1,000 and the 4,000 which now show up over here and I can say okay the 1,000 is there and the 4,000 is now here and then I can check them off and that puts us at zero the reason that's useful is now if I had an issue with epiphone I can and I go into my vendor drop down and I can say let's go to my my vendor center and let's go into the vendors and let's say say epiphone had a question about a payment now we can go in here and track you know the payment and then say well this is when we wrote it and we could talk about when it got cleared and we can say well it cleared the bank as of this day we've got the detail of the check clearing as opposed to if we did not do that then we wouldn't see it actually cleared on our side of things which isn't a huge deal because you know we can just note that down but you want it gives us a little bit more detail okay so now we have reconciled so everything is reconciled we're good to proceed but I'm not gonna proceed just yet because we're gonna save the next presentation for actually hitting the reconciliation button and then we'll talk about the reports that are created just note at this point in time that what we have done is the process of reconciling which we know is complete because we have a zero down here if this is anything other than zero then we should go back in and try to fix something to try to figure it out because it really should be easy to get it to zero because I'm just chicken and tying everything off and if something's on the bank statement but it's not on our books then we probably have to adjust our books adding it or if something's different in terms of the data input on the bank statement to our books then the question as well as the bank statement wrong or did we miss in key the data input probably we missed key the data input we probably have to change our books and once again getting that to zero means you have a high level of assurance not just against the ending balance but also for all the other transactions and the other side of them in the double entry accounting system that's kind of a point of the reconciliation note that just doing this even if you didn't look at the bank reconciliation would still be a huge good internal control but this is not the bank reconciliation the bank reconciliation is going to take this bank reconciliation thing and create a bank reconciliation report which is going to be tying out the cleared balance which is the bank balance to the unclear balance which ties out to what's on our balance sheet as of the same date the difference being the unchecked off items those being unchecked off because we know that we wrote them or that we deposited them yet the bank has not yet cleared them at that point in time so that's and so that's going to be the process and we'll do the reconciliation they also just know that this is not like zero like if you had it if it was off you could try to reconcile and then and it gives you an option return to reconcile leave reconcile or enter adjustment if you enter the adjustment it will force an adjustment and make some kind of plug account called like reconciliation adjustment but again you so you could do that if you can't figure it out or if you have to if that's what you have to do for the first bank reconciliation because it's just a complete mess for whatever reason then maybe you have to do that but you don't want to do that because that's going to again cause you problems going forward the only reason you might do that is if your first bank reconciliation was a complete mess and then after you get past a certain point then everything is should be running forward once your beginning balances are proper which we'll see in the second present in the second month okay so we'll press the button next time it'll be great come back next time when we continue