 QuickBooks Online 2022 bank reconciliation bank feeds first month get ready because it's go time with QuickBooks Online 2022. Here we are in our bank feed practice file. We set up with a 30-day free trial holding down control scrolling up a bit to get to the 125% currently in the home page. Otherwise, no one is they get things done page the business view as compared to the accountant view. If you want to change to the accountant view with something you can do by going to the cog up top switch to accountant view down below. We will be toggling back and forth between the two views either here or jumping over to the sample company currently in the accountant view back on over to the bank feed practice file. Open it up a couple tabs to put reports in by going to the tab up top right clicking on it and duplicating it tab to the left right click on it and duplicate again. We're going to go back to the sample company just to look at where the reports are located in the accountant view which is on the left hand side under reports back on over to the business view it's still thinking but that's okay we're in the second tab here we're going to go into the business overview and open up a couple reports you probably know the ones to you know which reports were opening up here we're going to go into the reports to do that close up the hamburger balance sheet that's right the balance sheet let's do it for three months this time from 0901 to 1 to let's say 1130 to 1 and then I'm going to hit the drop down here and say I want to do it on a month by month comparison and then run it so now we've got the sept oct and november and these are going to be our dates as of that point in time we're going to be focusing in our our checking account information tab into the right then we're going to go into the business overview again reports again closing up the hamburger we're looking at the profit and loss this time we're going to do that three months at the top three months from 0901 to 1 to 1130 to 1 and hit the months drop down or this drop down and then the months display columns by drop down and then months and then run it so now we've got our income statement September October November and the total information here now we're going to be focusing in on the balance sheet going to the first tab on the cash accounts up top and doing the bank reconciliation process note that as we do the bank reconciliation it will be an internal control that you want to do no matter what kind of industry that you're in or what type of business that you're running but it will be a lot easier to do the bank reconciliation if you're in that type of industry where you're basically dependent on the bank in order to record the transactions because you're not going to have those timing differences in that case including the outstanding checks and outstanding deposit so it'll be an easier process but one you still want to do because it will be safeguarding against for example missing transactions having the bank feeds for whatever reason not importing the transaction or you having deleted them somehow in some way or having the bank feeds enter to transactions so that you've doubled up on some kind of transaction so what we want to do is compare what we have in our books to the bank if we're doing a full surface type of bookkeeping system we want to do the bank reconciliation process to double check our records to the bank and you have a bigger kind of internal control and it takes a bigger role and is even more important in a lot of ways in that type of system so if I go back on over to our flow chart here just remember that we mainly did our accounting system as if we're dependent on the bank so not only on a cash basis system but we said we're going to wait till everything clears the bank so for example the deposits we waited till they cleared the bank we didn't record the create sales receipt which would be a cash basis system in that in which we're using the full service cash basis system but rather dependent on the bank for most of the transactions although we had a few transactions where we did jump on over to an invoice and a cruel kind of component and using the create sales receipts the more you're dependent on the bank if you did all your transactions just constructed from the bank feeds then you're not going to have a difference between your books and the banks if everything pulled in properly because you're not going to have any outstanding items if you have a full service bookkeeping system in which whether you're on a cash basis or a cruel basis you record the transactions first as they occur and then you compare your transactions to the bank statement you will typically have outstanding checks and deposits especially if you're actually using physical checks it's quite likely that you're going to have outstanding checks because it takes a lot longer for them to clear but even with electronic transfers it takes a little bit of time for them to clear so you might still have some outstanding checks and deposits that are timing differences between when you entered them into the system and when they actually cleared through the system the more you do electronic transfers the more you record your transactions actually from the bank and verify them as clearing before recording them the more likely you're not going to have as many differences and you still want to do the reconciliation but you're really checking to see if you double input anything or if you kind of deleted something or missed the input of something this is going to be our mock bank statement so we're going to do September and then October now the September one that's the first one we started entering data for so the first problem we have when we do the first bank reconciliation whether you use bank feeds or not is that that beginning balance number may not be there because you're going to have the cutoff date that starts at that point in time note that the software for QuickBooks is not software that's going to pull in the ending balance and we're not doing the bank reconciliation just to verify the ending balance of cash we're doing the bank reconciliation because we want to verify all the transactions that have happened in the system in other words by us entering the bank reconciliation by us entering cash transactions for example there's a double entry accounting system so everything we enter into cash is also having an impact say on the income statement a lot of times as well so in other words the deposits are typically increasing income and the decreases are typically increasing the expenses so it's not just that we're trying to verify the checking account over here in order to do the bank reconciliation it's much bigger than that we're verifying that all the activity if I go into the activity here that all this activity has been entered properly and if it has that not only affects the checking account but it also verifies that we have at least entered the transactions somewhere else on our books so we at least have the transactions in the system that's why it's a big internal control we could still make errors we could still post them to the wrong account and what not but it's a huge internal control against basically not having entered something and being able to have the double entry accounting system be in balance just with the balance sheet being in balance those two things are really big internal controls and makes it a lot more likely that your financial statements are correct so to do that internal control we're going to compare our financial statements as of a point in time to the bank and then do a reconciliation comparing the activity that has taken place if we're dependent on the bank then normally these ending balances will actually match what's on the bank statement because we created our books exactly from the data that's on the bank statements however if we're doing a more full service system then what's on our books as of this point in time will not match what's on the bank statement as of that point in time and we'll have to do the process of a reconciliation to make a report to tell us exactly what the difference is which would typically be outstanding checks and deposits those which we put into the system but which have not yet cleared the bank and it's okay that that is the case because they will hopefully clear in the future and if we know exactly what the difference is we can verify all other transactions the beginning balance here even if we're dependent on the bank will not match what's on the bank statement because that beginning balance has not been input in the system so the QuickBooks is not going to try to get the ending balance correct that's not the objective of QuickBooks it's the objective to get all the detail in so that we can verify that the detail is done correctly and then get our balance to the ending balance and in so doing we were able to construct our books there's other software that will pull in all the ending balances from your financial statements just to create a balance sheet but you can't create a double entry accounting system by doing that okay so then so if I go back on over here we can see that that number is different than our ending balance here part of that is going to be the beginning balance that we have to put into place so let's do this we're going to go into our banking account I'm going to go to the first tab and if you're in the accountant view then you're going to go into the bookkeeping on the left hand side and then we're looking at the reconciled if you were in the other view and the accountant view you would be going into the accounting on the left hand side and then reconcile up top okay so then we're going to hit the drop down and we're going to be looking at the checking account that we want to be reconciling this time the beginning balance note is at zero so that's going to be our first problem so to get that beginning balance correct what I can do is just go into the register enter the beginning balance it's not going to change this zero at this point in time but I can check it off in the process of the first bank reconciliation which is what we will do here and then going forward that beginning balance will be correct so let's do that process to do that I'm going to right click on the tab up top I'm going to duplicate it and I'm going to go into the register so let's go into the register by going into the the bookkeeping on the left hand side and then bookkeeping on the left hand side I'm going to go into the chart of accounts and close up the hand boogie and I'm going to go into the register for the checking account and I'm just going to add that beginning balance the other side I'm going to be putting into equity you typically want to do this at the beginning or possibly prior to the first period that you're going to be recording so if you can have a full year of the current data and put your prior year data as of the beginning of the prior year like December and start your current data in November I mean in January that would be good but we're going to put it to equity either way so it shouldn't be a big deal either way so we're going to hit the deposit just do it just do it here so I'm going to put this in 0101 and I'll put this in as of the prior year 2-0 let's do it this way I'll put it in as of 12 31 2-0 and then I'm going to say this is the beginning balance and I'm going to put that in a deposit and it's going to be for that $10,000 that's our beginning balance on our bank statement right there so that's what we want the other side is not going to go to the income statement it's going to go to equity and the rationale is that all the other beginning balances we would have to set up independently if it's coming from another accounting system and if it was income it was recorded in the prior period and it's going to roll into equity by this point so we're going to put it into say retained earnings so there it is there's our transaction let's save it save that and then what's that going to do well if I go back on over to my balance sheet and run it again we now have an increase in September September for the checking account well it's going to be included in September let's bring this all the way back from to 12 31 2-0 12 31 2-0 there's our 10,000 right there there's our deposit that we have put in place the other side's going to retained earnings so I'm going to go back up top back to our balance sheet and the retained earnings is a little tricky you can't drill down on the retained earnings so it won't let you kind of drill down on it from here I won't do it this time but you've seen it in the past that you can basically go into the general ledger report and see the detail if you wanted to see the activity so be aware of that if you need to get into the retained earnings you can't use the zoom feature but you can run a report if something has been posted to it called a general ledger report okay so I'm going to go back up top up top and let's go to the first tab then and so that's the the ending balance I know that that's coming from the bank statement it's going to be the 25 5 4 8 0 2-0 2-0 5 5 4.8 0 is that right let's check it one more time 2-0 5 5 4.8 0 2-0 yep okay and then the date is going to be as of the end of September September 30th 2021 right is that what we have on the date here that's right okay let's start it let's get this going let's get going so here's the statement ending balance that's the ending balance that's got to be equal to the cleared balance which is everything that we're going to be checking off anything that's not cleared is going to be the reconciling items our biggest problem here is we don't have that beginning balance it's not going to show up as that beginning balance for us here but if I just check it off right there then it's kind of like the same thing so it's a little bit of a problem it's a little bit added twist that's what you have to deal with on that beginning the first bank rec after this it'll all roll forward fine after that point also note that everything down here in the green they kind of checked off with the bank feeds so these have basically been checked off because they they went through with the bank feeds now if you are completely dependent on the bank then then these transactions you you basically could check all these off and they would all already be checked off and you would have a difference of zero and you could just go forward from there and it'll be nice and easy if you're not completely different dependent on the bank then you're going to have some timing differences and still it might do it for you because all these items will be checked off already and then the ones that aren't checked off might be might be the going to be some of the differentiating factors however if there's a problem this whole thing of having them having them checked off is is not going to be as as beneficial because you're still going to have to go through the whole bank reconciliation process of taking and tying everything out which is what we're going to do now so I'm going to say okay I'm not in balance I need this to be at zero in a in order to reconcile I should be able to do it because if it's on the bank statement and if it's not on our books and the bank is right I need to fix my books if it's on my books and not on the bank statement it might be an outstanding check and that's what we're going to basically look for so I'm going to uncheck the whole thing so I can go back in here and tick and tie them out typically to do this as easy as possible I'm going to uncheck these two is to is to focus on either the payments or the deposits first so I'm going to filter this down to the deposits and I'm just going to take this tie taking tie out as quickly as possible the 10,000 we already have I'm going to uncheck that why is that checked 10,000 is is what we've got up top if I uncheck that there it is and there's one payment that seems like it's still checked off here I told you to uncheck I told you uncheck so now nothing's checked off except the 10,000 I'm going to go into the deposits there's the 10,000 so now I'm going to go back and forth ticking and tying things off ticking and tying ticking and tying I got the 10,000 it's not in the beginning balance but I'm going to say it's good anyways then I'm going to take off all of the deposits so I'm going from the bank statement here to the books because if it's on the bank statement it should be on the books not necessarily the case advice versa if you're looking at deposits you'll have at least the date and the amount that should be tying out and if it's a transfer you'll also might have some more information like the description that can help you to kind of figure out which is which so I've got the 3814 let's go 3814 and let's do that 3814 back on over is there a deposit 3814 there is that and then I'm going to go back over here and say where I gotta I gotta get this down I'm going to get 3814 let's do two at a time sixty oh oh three and nine nine nine nine sixty oh three so there's the nine nine nine nine there's the sixty oh three good and so then I'm going to say alright let's go back on over to this one and say we check it we're going to check those two off I checked them out now I'm checking them off check them out and check them off 1887 1907 so there's the 1887 1907 checked it out and checked them off let's where I checked them out now let's check them off I can't remember where to go though I can't remember where to go I'm lost I'm lost my mouse is going in circles 1099 85 and 1907 so we're going to say there's the 1907 they might not be in exactly the same order and note that the dates on our on our records are usually going to be before they should basically always be before this is a mock problem so I might not have done it perfectly but they should always be before the dates that are going to be in on the bank statement because we knew about the process first or they might be at the same time if we constructed our bank statement directly from or our books directly from the bank feeds 9286 and 1060 so 9286 9286 and 1060 and so there are those two so let's go back on over 9286 and 1060 and then we've got the 5607 and the 54436 okay so 5607 54436 I think that was the one going back on over yellow fine it yellow five it's been yellow five that's the process of making it yellow I made that up myself 140 and 41 so 140 and then 41 done 140 and 41 done so we're going to go back on over and say yellow five yellow five defied the yellow five 7 to 20 and 1907 7 to 7 to 20 1907 all of those are checked off except these two we're going to imagine that those are basically outstanding checks or outstanding deposits which seems unlikely since they're at the beginning of the time period here but we're going to leave it as is and so those are the ones of course we would want to check out if they were at the end of the period we would say well those are probably outstanding items that are there if they haven't cleared then we would check if they cleared afterwards and if they cleared afterwards then we can see they're legitimate if they haven't then we're going to say there's a problem there maybe we should be removing those in some way shape or form obviously those came up in our practice I believe because they were test transactions as we were testing moving away from a cash basis or one which were dependent on the bank to more of an accrual example let's go to the payment side of things let's do that that'll be fun payment side and so these are the decreases doing the same ticking and tying tick and tie you can't tie and tick because it doesn't sound as good where am I going where you going mouse 1 9 4 4 4 8 1 9 4 4 4 8 so where's that 1 9 4 4 4 8 going back on over and saying mouse you don't know where you are where's the food where's the food my mouse wants 3 6 6 0 3 62 3 6 6 0 3 62 0 3 and then 62 38 was it 78 I believe it was indeed 62 38 75 25 75 25 50 75 25 25 75 25 50 and then okay so I'm going to go back on over the dates might not be perfect bear with me it's a practice problem yes there is a bear with me there's a bear with me but it's a nice bear 30 50 32 80 32 30 50 so there's a 50 30 32 80 so there we have it we're missing this one which again I'm assuming possibly was from a practice problem kind of scenario where we were where we were basically moving away from a from a pure basis of dependent on the bank but in theory we might have things that haven't been checked off and if it was a check in particular it's likely that we entered it in our system they have not yet cleared the bank so anything that hasn't cleared the bank yet we could then we could then verify because when we do the reconciliation as of a point in time in this case September 30th it's usually it's going to have to be some time after that point so we can go to our bank account and see if these items have cleared if they have great it's just a timing difference and this is the reconciliation process if they have not then we were going to have to go in and possibly take action on it and say okay is it did I enter something incorrectly in our system did we enter something twice for example or something like that and take action from that point so you can see we're in balance because there's no difference so we've got the statement balance that's what was on the statement we've got the cleared balance that's not all the stuff that's not everything because we had some stuff we didn't check off it's all the stuff we checked off is the cleared balance this is not the bank reconciliation here the screen this is the reconciling process the bank reconciliation is the report that will now be generated from the unclear items that will be the difference between what is on the book and what is on the bank as of the cutoff date 6 30 21 so you don't want to hit the finish button until you have this at zero if it's not if it's like a one you got like one dollar in it you can say well that's one dollar of it's immaterial to decision-making but remember you're not trying to get the bank balance to be correct that's not the point the point is to get all the other transactions correct that are that you're recording as you enter things to cash and if it's one dollar off that means that it could be like five deposits and twenty checks that caused one dollar to be off if you netted them out which means it could have a substantial difference on your on your actual financial statements even though it's only one dollar if you get it down to a zero then the confidence goes way up that you've actually entered all the transactions that have cleared the bank properly in your system not only making the bank statement correct but making all the other transactions correct as well and you should be able to do that because again all you're doing is taking time on the bank to your books if it's on the bank statement it should be something you should check off on your books unless something's wrong in which case you got to fix your books if it's on your books and not on the bank statement maybe it's an outstanding item which means it's just a timing difference that's what we're looking for which would only be there if you're not dependent on the bank to enter the transactions but you're entering them independently or it's an error in which case you can take action and correct whatever mis-miscalculation happened in the error be careful on deleting things or stuff in prior years in particular when you're correcting things okay so let's go ahead and finish it finish it for crying out loud stop talking that's my profession here I'm a professional talker just click the... alright so if we go to the history now and then we're gonna have our report so that we can view the report and so there it is so we got the bank feeds reports along kind of intimidating reports but in essence the meat of it's in the middle see right here you got your summary the beginning balance is not right it will be next time when we do the second one but that's because we had that beginning balance problem so that doesn't tie out to the beginning balance on the bank statement and then we've got the checks and cleared items so the checks and cleared items on the 258619 if we go over here we got the 258619 and then the deposits are at the 14099 which is over here is different by the 10,000 because that's where that 10,000 is at that's where the beginning balance instead of having 10,000 it's included in that number we got to recognize that for the first bank reconciliation then we got the statement balance 20,55480 that's gonna be the bank statement they mean 20,55480 and then we got the unclear transactions here so that's what we didn't check off so now it's saying these are the things that are the difference between the bank statement and us the things we didn't check off and the register balance to 14,437,60 which ties out to what's on our balance sheet 14,437,60 right there 14,437,60 right so that's that this from here to here is really the reconciliation this is what's on the bank statement this is the difference this is what's on our books however this is not sufficient this unclear transactions we want to know what those transactions are if you were to an auditor asked you for a bank reconciliation this is the report they would want but if you just give them the summary area it's not enough because I need to know what the what are those amounts that make up that 6112720 and are they legitimate amounts that should be there so for that I can go down the detail for the checks payment cleared which is on the bank statement deposit and other cleared those are in essence on the bank statement too additional information unclear checks that's the one we're looking for so if I pulled out the trustee calculator here to do some calculations with we're looking for these unclear items of the 7167.29 and on the deposit side we had minus the 105.09 that's the 6117.20 you'll recall that's what we want that's what we want in the detail so we can see these actual items possibly looking then in future periods to see if they have cleared in future periods if they have great they're just timing differences and they're the reconciling items as of this point in time if they have not then are they going to clear is are these transactions entered in error and we can take action on those at that point but these items that have not cleared are not really the main point there one of the points of the bank reconciliation but the main point is if I know exactly what this difference is then that gives me more assurance that all the ones that did clear all the transactions we have put into the system that are input through the cash transactions are correct and that means that all the other side of the transactions that helped us create basically the whole income statement the whole other financial statements are at least should be in the system if not possibly recorded to the proper account right so that's a huge internal control that's what we're looking for with that notice also that these reports are a little bit kind of tricky with the bank reconciliation so a little bit different than other reports meaning they're an internal control report rather than rather than something that's being created as we do the data input so if you delete something for example in the past this report changed as you deleted it it would throw you out of balance in the reconciliation so this report has to be a static report and you might even want to print it out I think it keeps them as a static report even if you change something but I usually print them out for that reason so that if someone changes something in the past and my reconciliation no longer is reconciled I can go back in and kind of try to figure out what has happened so we'll do the second bank reconciliation next time and that in that case we won't have that beginning balance issue and it should be a really easy process