 QuickBooks Online 2024 Bank Reconciliation Opening Balance Problem Get ready and some coffee because we're getting the books on track with QuickBooks Online 2024 Here we are in our GitGrit Guitars 2024 QuickBooks Online sample company file we set up in a prior presentation Opening up the major financial statement reports like we do every time The reports on the left hand side and the favorites right-clicking that balance sheet to open a link in a new tab Right-clicking the P&L profit and loss to open a link in a new tab Same with the trustee TB trial balance We will tab to the right, close up the hamburger and change that range up top going from 0101 to 4Tab 0229 to 4Tab Let's do this on a month-by-month breakout and run it Then we'll tab to the right, closing the hamburger, changing the range 0101 to 4Tab, 0229 to 4Tab, selecting the drop-down months and run it And then we'll tab to the right, close the hamburger, change the range 0101 to 4Tab, 0229 to 4Tab, drop-down and month Let's run it 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? 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Where did I go? We're at the deposit should be 146,70,85 So over here we're at the deposits 168 That's because I have this checked off Let me uncheck that 143,70,85 And then we're at 143,70,85 Okay, so we have an issue between the payments And the beginning balance So note that this beginning balance problem Really just means that we didn't get this in the system As kind of the beginning balance part But it's still showing up here As our beginning balance that we put into the system Which was 25,000 instead of 30,000 So if this was 30,000 Then all... What I could do is check it off And just say, okay, this beginning balance Is just going to be included here And it'll be part of the deposits And I'll be okay with that I'll note that in my first bank reconciliation And be able to move forward So, but even doing that I still have a problem because this 25,000 Is not 30,000 It should be the 30,000 Which is the beginning balance over here Why is it not 30,000? Well, because we pulled in this 25,000 From the prior accounting system Which had 25,000 on the balance sheet So we had to put 25,000 in place Because that's the thing that we needed to be In balance to bring over the books What's the difference between the 25,000 And the 30,000? Well, it's going to be the outstanding items You would think as of the prior bank reconciliation date Which in this case is December 31, 2023 So in other words, there were outstanding checks Prior to that point in time And that's why we also have a difference Between these cleared items We couldn't find these cleared items On our bank rec In our books And the general rule is If it's on the bank side It should be on our book side Or we should be adding it So, but this beginning balance Has a special issue Because these checks weren't actually Written in January They were written in December The prior period So that's going to be the issue This 25 that we put on top here Is representing the beginning balance Which includes the outstanding items Which in our case are those two checks Now note when I check that off Because those two things net out My difference is at zero So we could do that I could say, okay, it's my difference is zero I'm going to move forward Although it's not perfect to do that Because I still don't really understand Why I have 25,000 instead of 30,000 And why I have this 4,000 And 1,000 that has cleared That's one problem The second problem is That if these two amounts had not cleared Meaning if they were outstanding And they remain outstanding They were outstanding in December They remain outstanding through January Then you're not going to be able to Do that method of simply Checking it off and be exactly in balance So what we would like to do instead Is really put these two on the books We would like to put them on the books As of the date the check was written Or possibly as of the date of the prior cutoff period Like we did with the beginning balances As of 12, 31, 23 in our case So that's what we will do here I'm going to say let's put these on the books So we'll go back on over And say if this 25,000 I want to get to the same 25,000 But I want to represent it as 30,000 on the deposit here For my beginning balances And two checks of 5,000 So that I have my audit trail Of the two checks that were written In the prior period I can see that they cleared in the current period And then if I want to go back To the prior accounting system I can get more detail about those two checks Alright, so to do that Let's go ahead and leave here So I'm going to say finish later So I'm going to uncheck this for now And then save for later And then let's go back into my chart of accounts And then in the chart of accounts I'm going to go into the checking account And look at the good old register And I'm going to imagine that I went back To my prior accounting system And looked up those two checks Which I'm going to enter as just Basically expense forms Because I don't want to enter a check number And I'm going to put them in there As of 12, 31, 2, 3 In our practice problem You may want to put them in there As of the date the actual checks were written But my thought would be I'm going to put them in there this way And then if I have a question about those two checks I can always go back to the prior accounting system And look them up This is just to give me a note That this is coming from the prior accounting system And I want to reference to The prior accounting system So then I'm going to say the name I'm going to say it's Epiphone Now Epiphone is a vendor that we buy And then I'll say this is a prior Period Expense form And so do do do And then I'm going to say that this was for 4,000 Okay, and then Epiphone is who we buy Inventory from So you might think well I have to put that to Inventory But we're not going to put it to Inventory Because when I put the beginning balances on the books I already accounted for Inventory As of the cutoff date of 1231 Inventory we made it correct By doing our journal entry process So what I want to do is just have a clearing account All my balances are correct already I'm just going to clear this out To the opening balance equity account Which is that generic account That QuickBooks makes up, right So I'm going to put the two checks To opening balance equity And then I'm going to make an adjustment to that 30,000 The other side also going to opening balance equity Which will net out opening balance equity Back to zero is going to be the idea Alright, so let's get an idea of what that will look like We're going to say this is going to be a prior period adjustment Checking account, the other side is going to go to opening balance equity Let's save it And then if I go to my balance sheet And run it And we had an adjustment to the checking account And we had an adjustment we can see down here The other is a balance And the opening balance equity I'm actually going to open up the general ledger report To see the detail that way I'm going to go to the tab to the right Right click on it and duplicate it And then I'm going to go to reports On the left hand side Close up the hamburger Go all the way down to the accounting reports Which are for my accountant Open up the general ledger And then I will type in here The date of the transaction 123123 to 123123 And just see that activity So in the checking account we have this expense form For the 4000 And then in opening balance equity We had a transaction For opening balance equity Here Of the 4000 Right there Alright, let's do the other one now So I'm going to do the second one I'm going to go back to the first tab We're back in the register again And let's select the dropdown And do another expense form And say this one is as of 123123 as well This is a prior period expense form And I'm going to say this was for the 1000 And I'm also going to say the payee is epiphone again But I'm going to put it once again to opening balance equity So same transaction Opening balance equity I'm going to run that And now if I take a quick look on the balance sheet And run that again We should have an opening balance equity now The 5000 So there's our 5000 in opening balance equity And then up top We made a change to the checking account as well Now what I'm going to do if I go back into my register And scroll up in the checking account Let's run this one again We have our activity here Now this 25,000 we put in the checking account I'm going to now change to 30,000 And the other side is still going to be going to opening balance equity I could do this two different ways I could just change this transaction This number 230,000 And the other side from this deposit form Went to opening balance equity Or I can make another transaction Basically another deposit form For 5000 And the other side going to opening balance equity We might be a little skeptical We could drill down on this form And just change it to 30,000 But maybe we don't want to go back and do that That might seem a little scary So maybe instead we add another one 5000 which will be on the deposit side of things Let's do that So I'm going to go over And this time I'm going to make a deposit As of 1231 And this is going to be for Beginning Balance Balance Adjustment For outstanding Checks Let's say And it's going to be a deposit of 5000 And the other side is going to go to Opening balance equity And now opening balance equity is going to Net out back down to zero So let's go ahead and save that one And if I go back to my balance sheet And run this We adjusted the checking account Should be basically back to where it was before And opening balance equity Should be back to zero If I look at the detail In my general ledger And run that one You can see that basically these two things Net out in the checking account And then in the opening balance equity We have a similar kind of Activity here Here's the deposit And then here's the 4000 And the 5000 And the 5000 here That are going to be a deposit And then these expenses That are going to check net out against it Leaving us once again To what the beginning balance was Which was 25000 But providing the detail That we can then check off To see the audit trail in 5000 here That are netting out against each other Okay, now let's go back into The first tab Hamburger Let's go into our transactions Again into the reconcile And close the hamburger We're going to reconcile again And then I'm going to resume The reconciliation process So now What we have here is I have these two that net out against each other And now I have these two expense forms Which I can check off Boom, boom And then if I go back to this side We now have these two that we can check off As things that were on the bank statement That are clearing That would give us the total checks Of 111829 So that's going to be The 111829 So now these two numbers tie out And it's just the beginning balance By the 30,000 Now I'm not going to get into Trying to get this beginning balance to be 30,000 But rather just say I'm going to check these two off As another increase Which is on the deposit side of things So I'll just basically check these two off And boom Now we're in balance We have an exact match Of the statement balance And the cleared balance And that's what you want that to be You want that to be exactly zero Remember if that's anything other than zero Even if it's off like by $2 The $2 that it's off by Could be a combination of like 20 checks And like three deposits or something Which means you're losing the detail That's used to create the other side of the transaction Like the entire income statement Also note that we have a bunch of stuff here That hasn't been checked off Remembering that those are the items That we expect to be outstanding Those are the That might not be wrong Those are the items that we think are going to be The difference between the bank balance And our balance So the next thing we can do of course When this is finished is we can finish it When that's a green zero We can finish it When we do that We'll actually be able to generate the reports Remembering that this process is important Even if you don't know what the reports are doing Because you're reconciling here But the report is the bank reconciliation It's going to provide us The balance between the bank balance And the book balance Which of course will be The things that we didn't check off here We'll finish it next time So we'll put us in suspense now And then we'll take a look at the actual reports That will be constructed when we finalize Next time So for now I am once again Once again again Going to save it for later Save it for later And then we'll finish it off If we jump on over to the trial balance Note that although we entered The transactions We didn't actually make any changes to the end numbers Because the transactions netted out against each other Those transactions being in the checking account Where we adjusted essentially the beginning balances And had an equal and opposite adjustment To the checks that were entered And then in the opening balance equity Where the other side offset each other as well So we're back to zero The starting point there as well So if your numbers tight out last time That would be good this time