 QuickBooks Online 2024 Credit Card Reconciliation Get ready and some coffee because we don't accept excuses like, I'm too tired unless someone physically forced you to carry two tires in which case you've been too tired against your will. First, a word from our sponsor. Yeah, actually we're sponsoring ourselves on this one because apparently the merchandisers they don't want to be seen with us. But that's okay whatever because our merchandise is better than their stupid stuff anyways. Like this CPA thinking cap for example. CPA thinking, CAP, you see what we did with like with the letters and this CPA thinking cap is not just for CPAs either. Anyone can and should have at least one possibly multiple CPA thinking caps. Why? Because based on our scientific survey of five people all of whom directly profit from the sale of these CPA thinking caps wearing this CPA thinking cap without a doubt according to the survey increases accounting productivity tenfold. Yeah at least. Apparently the hat actually channels like accounting energy from the quantum field ether directly into your head allowing you to navigate spreadsheets faster. It's kind of like how in like the matrix when Neo learns kung fu or at least that's what the scientific survey is saying. So get one because the scientific survey participants could really use some extra cash. Accountinginstruction.thinkific.com Here we are in our QuickBooks online bank feed practice file we set up in a prior presentation opening the major financial statement reports like we do every time the reports on the left hand side we're in the favorites. Right-clicking on that balance sheet so we can open a link in a new tab right-clicking the profit and loss otherwise knowing as the income statement doing the same and the trustee TV if you don't have that trial balance in the favorites you can search for it. Let's tab to the right and close the hamburger on the meat of the balance sheet and then we're going from 010124 tab 033124 tab selecting the drop down we want to see it on a month by month and run it to refresh it tab into the right closing the hamburger again changing the range 010124 tab 033124 tab drop down we want to see this in months and then run it to refresh it one more time tabbing to the right closing the hamburger changing the range 010124 tab 033124 tab I messed up 033124 tab and then months and run it. Alright let's go back to the balance sheet we've been working on our bank feeds we started out with of course the checking account that transactions related to it but we also note that we can connect the credit card so we've now been practicing on the connection of the credit card entering transactions from that one which is often easier than with the bank account in that you only have really electronic transfers with the credit card so they're usually easier to record the transactions directly from the financial institution from like in essence the bank right so as they come through the difference being that as we make purchases instead of decreasing the asset account of cash or credit or the checking account we increase the liability account which is the credit card liability and then we simply pay off the credit card we also don't have to have the issue of deposits and collecting money from customers typically with the credit card which often is an area of confusion in our revenue cycle that we have to deal with with the checking account now we want to think about the reconciliation process so this is another one where usually when you think about reconciliations you think bank reconciliations and that's in essence kind of tying out what's on our books at a point of time usually the end of the month to what's on the bank's books tying out to basically the bank's statements but we can also do the same thing with the credit card because again they're acting in a similar fashion as the checking account now note when we have the bank feeds it kind of gives some confusion to people when they start thinking about what the reconciliation is and whether or not they still need to even do the reconciliation process and almost certainly you still want to do the reconciliation process although the reconciliation process might be a whole lot easier depending on the type of system that you have set up through the bank feeds in other words if you are constructing your entire books directly from the bank feeds which as we've discussed can only be done if you're in an industry allowing you to do that then the reconciliation will be very easy because your balance as of any point in time should match what's on the bank's side because you created your books directly from the bank however that's not the traditional way that we think about bookkeeping if it was a full service accounting system we would record the transactions first on our side watch them clear the bank and then we would reconcile the two people then doing different books for the same numbers giving us more assurance about the internal controls that everything is correct so in that case we might have some differences because we'll have timing differences things that we knew about that haven't cleared the bank the classic timing difference are checks because when we write a check that are outstanding when we're talking about a bank account which these days we don't write as many checks so we don't have as big of a timing difference between when we write them and when they clear but even if you have a system where you're basically creating your financials from the bank feeds you probably still want to just do the reconciliation because that'll help you to verify that you haven't entered any transactions twice or deleted any transactions so it would still be good to do on the credit card side of things usually almost all businesses are basically constructing their credit card transactions directly from the bank in other words because they're all electronic transfers usually when we make a purchase on a credit card we don't record it on our side and then wait till it clears the bank because they are all those kinds of transactions that are easiest to wait till it clears the bank before we record them because they're all electronic transfers so if I purchase supplies as we did here with the credit card I'm probably not going to record it on my side and then match it to the credit card statement because I purchased the supplies with an electronic transfer and I can verify that it went through fairly quickly and therefore the easy thing to do is just to construct my books from the credit card statement that means that the credit card should be really easy to reconcile because I've constructed my entire credit card balance from what's on the credit card so we can do the reconciliation and we might as well do them but they should be quite easy except possibly the first bank reconciliation or credit card reconciliation because you'll have to deal with that beginning balance issue in that if you started using a credit card for the business if you look at the credit card statement you might have a beginning balance in it that isn't in your system yet, right? You owed the $300 from the prior accounting system or possibly before you were using the credit card for business or something like that you got to get that first balance reconciled once it is reconciled then everything should move smoothly from that point going forward so obviously the credit card balance is also a little bit more difficult if you don't pay it off each month because then you can have an outstanding balance that you're going to want to make sure that you're tracking properly from month to month so this is just a mock credit card statement that we will do just to get an idea of this process I also just want to point out before we get started if I go into the transaction detail here then it's common to think that the reason we do the reconciliation is to make sure that the credit card balance is correct or similarly with the checking account to make sure that the cash balances are correct and we do want to verify that the balances are correct on the credit card and when we do the bank statements the bank balance but what we're really trying to do is verify that all the other transactions are correct if I can tie in exactly to what this balance is if I can reconcile to it and I know exactly what the difference would be there's a difference which there won't be on the credit cards typically there will be possibly on the checking account and we'll talk about that later but if I know exactly what the difference is I not only verify the end result but I also verify all the transactions that are inside of it why is that important? because the double entry accounting system has two accounts affected with every transaction and the financial transactions the checking account and the credit cards if you're using credit cards a lot are flowing through the rest of the accounting system so you can see the other side of the transaction is going to the the income statement so our income statement is being built with these transactions from the bank fees the credit card and the checking account so I want to verify not only that the balance sheet ending result is correct when I reconcile I'm getting an internal control about all the transactions that should be entered have been entered so that the other side of the transactions which is typically the income statement or profit and loss I have verification that it is correct that's what we're really trying to verify we're not trying to verify just one number on the whole financial statements it's not just about cash it's not just about the credit card balance it's about the other side which is typically the thing that constructs the income statement alright so then if we do that we can also note that this ending balance right here at the end of January would typically match what's on the credit card were it not for that beginning balance so I have 300 on the beginning balance and then I had 330 so the 330 is what I purchased and this is going to tie out exactly because I built my books from the bank fees from the credit card information directly but if I started tracking this information in the current period I might not have the beginning balance because if I start a new accounting system this 300 might have been in the other accounting system so what I need to do is I might have this beginning balance issue that I have to deal with so I'm going to put that on the books and then once we have that the second one will be easy let's go to the first tab and let's go to the transactions down below this is our transactions I entered the credit card information here everything has been entered once everything has been entered for the month and you have the credit card statement then if it was the credit card statement for January you'd probably get it sometime in February so it's sometime in February all the January transactions have been added from bank feed limbo into the system I can then go into the reconcile tab I will close up the hamburger it says match the books to the bank records connect accounts are easier to reconcile keep yourself on track find holes in your accounting get things tidy now you might ask why do the bank feeds make it easier to reconcile if I go back to the bank transactions you will recall with the credit card we just constructed our books from the stuff that came in through bank feed limbo so that means that I have constructed my books from the bank transactions and I know they also match what's on the bank because I got them from the bank if we're doing a full service accounting system like some of the stuff we did on the checking account you'll recall that we matched some transactions where we entered it on our side and then we matched it to what was on the bank that also helps with the bank reconciliation although in that case we're not actually constructing our books but you can see that when we match it when it comes through and we match it we've basically verified that the thing we entered on our side also matches what's on the bank side that's what we do in a reconciliation process so let's go the credit card will give us kind of a nice intro into the reconciliation and then we'll do another one with the bank feeds alright so let's go to the starting let's get started and so I'm going to select the dropdown we don't have to in the checking account yet we'll do that later right now we're going down to the credit card AMEX and the beginning balance is at zero often times sometimes you might have a beginning balance issue as well whereas you might have on your books a beginning balance that's not on the bank books and in the first reconciliation what you can do is you can just check it off as cleared you can deal with that issue so the ending balance I'm going to say is 630 so you can see here they have a beginning balance of zero and here I have a beginning balance of 300 I'm not going to worry about it because I don't really need it to be here as long as I recognize that and I check it off alright so then this is going to be what did I say 630 630 is the ending balance as of the end of January January alright and then let's start the reconciliation so here's the reconciliation format I'm just going to close this because I'll tell you I don't need to so we're going to say if you need to edit it here's the edit information so that has the beginning balance that has the number that we put in and the ending date and then this is the reconciliation process so what you have is the statement balance that's the amount that we just plugged in there from the statement and then you have the cleared balance so you'll note here that this should match basically what's on the statement in this case the credit card statement beginning balances and then the payments and then the charges here's the purchases and here's the payments we made to pay down the credit card we didn't make any that gets us to the ending balance so we don't have the same beginning balance that's an issue the charges note they're already checked off how is that possible because manually added from the bank feeds that's what this little green thing means that's how it's helping us to reconcile so everything that usually if these weren't checked off if these were not checked off like this I can just check them all off because they all came from the bank so they should all check off and be perfectly aligned because we constructed our books from the bank and then we didn't make any payments so we have a difference of the 300 what's the 300 the 300 is of course the beginning balance we have that beginning balance issue now if there was a problem if something was not reconciled what you would want to do is check out everything check off everything from the bank statement to the books because typically if it's on the bank statement then it must be on the books unless the bank statement or credit card statement is wrong if it's on the books it might not be on the statement if there were unclear transactions which there probably will not be with the credit card so what would you do you would uncheck this off and just take and tie everything off right so it's alright here's the 37 37 is 37 and then I'll say okay that's going to be let's make it green and then here's the 40 and the 40 is right there okay so that ties out it has to work if everything is on both sides is the idea there's the 28 okay 28 has been found and then there's the 114 and there's the 111 22 at the same time because I have mad skills and those two have been found as well boom level has been passed but we don't have the beginning balance of the 300 so I'm going to add that so I'm going to go over here I could leave so I'm going to save it for later I don't want to reconcile it until that difference is down to zero so let's save it for later and then I'll go into the I like to go to the chart of accounts and then go into the credit card amix and then I'll go into the register and then I'm going to say drop down and let's put a beginning balance in there with an expense type of form as of I'm going to put it as of the prior period which is 1231 to 3 so that it doesn't affect my current income statement and then I'm going to say this is going to go to the payee memo I'll just say beginning balance and then I'm going to say this is a charge of 300 and then I could put it into the equity account of retained earnings it might, you could put it into the income statement as well so it could be miscellaneous expense it's going to the prior period income statement before we started our books in the current period of 2024 it will then roll in to retained earnings so let me show you what I mean if I say save it and go to the balance sheet we can run this and let's run it for the prior period of 1231 to 3 to 1231 to 3 and run it so now I have the 300 down here which is on the income statement for the prior period which is 010123 to 1231 to 3 so there it is in last December but then it rolls into the it this clears out as of the end of the year and it rolls into net income which will then roll into owner's equity as of the current period which is really where it should go so I'm going to say alright as of 010124 to 0331 to 4 it's now in it should be the net is now in the owner's equity so there it is in the owner's equity so and then if I move this one up to the current date it'll close out the income statement 010124 to 033124 so that we have the current information in there as of the current time period so that's our beginning balance and then I can just say alright let's go back to my reconciliation then back to the reconciling process and reconcile and resume and then I can just check that one off note that this should be over here in the beginning balance but I'm okay with that I'm just going to say I'm just going to check it off and I can see that this number includes the beginning balance so if I'm over here checking this off I should have the beginning balance which I see is included in this number and then I found that number so that ties out to the ending balance we don't have any outstanding items which will typically be the case with the credit card so we should now tie out exactly on our books to what's on the bank's books we can finish it finish it it's green now because we have it perfectly zeroed out reconcile this account so we've done it alright and so then if I look at the reports we can then say here's our summary reports over here and so we have our report information here we also have the history by account and I'm on the credit card account and then here's our history sometimes it's useful you might actually attach your statement here so that if there's an issue with it you'll have the credit card statement so you might actually go into here and say I'm going to upload my statement I'm going to say let's take this statement here let's close it out and then I will upload it no I don't want to save the changes and then I'm just going to say boom upload it and so then you have it like in that as an attachment so when you look at your report you can see the reconciliation between you can see what you have here so if I view the report it's a pretty basic report because there were no differences so let's open that January back up and so do do do do so usually on the reconciliation here's the statement information this should tie out to what we have here but it doesn't because the two of them are matched together what happened yeah the two are matched together as just the 630 and that's fine for the first bank reconciliation I'm just going to recognize that and so here's the statement balance and then here's the register balance if I go to the balance sheet in other words after we made that adjustment we see that in January our register balance is the same as of the date of the reconciliation at the end of January in this case so that's fine and therefore there's no difference between the two meaning we don't have any reconciling items that we have to deal with because of course it's we built our books from the banks so these two things should match up we shouldn't have any outstanding like checks or outstanding deposits because it's the credit card and then this gives us just the information about the charges and cash advances which are basically already on the statement it's mirroring the statement this gives us the additional unclear charges and cash advances after the date this seems like information we don't really need because it's after the cutoff date I'm looking for information before the 131 so pretty there's not a whole lot going on with this report because there's no difference there's no timing difference as there would be with a checking account if you had outstanding items such as outstanding outstanding checks and deposits so let's go let's do it one more time I'm going to say let's go back to the transactions just just also note that if you go to the reports here and you search for reconciliation reports it'll basically take you back to this area so it took you back to the reconciliation area because although they kind of call these reports they're not really the same kind of thing as the other reports which are constructed from the transactions as we enter transactions giving support as we enter these transactions we build the balance sheet income statement and related reports these reconciliation reports are not exactly the same because they are internal control reports comparing our books to the bank books alright I'm going to go here and then back here again let's just do quickly the second month the second month should be easy because there's no beginning balance issue but this time we have a payment that we paid off that I can add in there as well so the ending balance I had 630 which is of course the ending balance before is now the beginning balance and then there's a payment and then a charge of 40 dollars to get us to an ending balance of 570 if I go to my balance sheet I see that it ties out so I'm like I need to reconcile you could not reconcile but you might as well do it because it's easy to do and if something does get out of whack the reconciliation is the easiest way to figure out what happened so I'm going to go back on over here and say okay let's just do it it'll be easy there's the beginning balance it makes sense and then the ending balance is 570 570 as of the end of February okay and then here's the statement balance that's what we just plugged in there and now this whole thing should basically match automatically right 630 40 and 100 should match exactly what we have 630 40 and 100 giving us an ending balance of 570 and everything's just ticked off automatically because I constructed everything from the bank feeds so it's only if this ending balance is incorrect that we would then have to go down here and say okay what happened and we'd have to figure it out that could happen because sometimes for whatever reason you delete a transaction or the transaction gets entered two times in which case you would actually have to tick and tie out each of these items to figure out what happened what's the difference between what's on the bank and what's on the books we would probably have to add it meaning the credit card statement but not in our books if it's in our books but not on the credit card statement then it's probably a duplicate or something given the fact that we constructed our books from the credit card statement and therefore we might need to void it or delete it being careful to do so so that we don't mess up prior period balances alright so this is so if this is at zero we can just finish it and say finish it now finish him no mercy just say done okay and then in the history again we might we might attach the credit card statement if we want to but I won't do it again because we saw that before we want to view the report basic report because there are no differences this is just mirroring what's on the credit card statement the register balance is the same as the statement balance or the statement balance is the same as the register balance that's all we really need to know really then they give me the detail down here but all we really need to know is those two are in essence the same because I already have that information on the credit card so that is that that's the process let's see where we stand right now because we did we did make one transaction adjusting in essence the retained earnings account and the credit card balance so here's where we stand on the balance sheet here's where we stand on the profit and loss let's run it again I don't think we recorded anything to it except for the prior period which rolled into the retained earnings so not on the current period and then here's the trustee trial balance so if you're following along if your numbers tie out to these numbers then great if not try changing the date range this is just basically the balance sheet on top of the income statement without the subtotals and then if you can figure out which number is off and there's a date issue drill down on that number until you get to the source document and possibly change the date to the proper one