 QuickBooks Desktop 2023. Bank reconciliation month number one checks and cash decreases. Let's do it within two its QuickBooks Desktop 2023. Support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course. Each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again click the link below for a free month membership to our website and all the content on it. Here we are in QuickBooks Desktop. Get great guitars practice fire. We started up in a prior presentation going through the setup process. We do every time maximize the home page going to the view dropdown. We got the hide icon bar open windows list checked off open windows open on the left. Reports drop down company and financial P and L profit and loss changing it for the just that first month this time 010123 to 013123. Customize it fonts and numbers changing the font to 14. Okay, yes and okay reports drop down again company financial this time. The balance sheet changing the range in from 010123 to just 013123 for that first month fonts and numbers on up to 14. Okay, yes. Okay, that's the setup process we do every time prior presentations we've been working on the first month bank reconciliation tying out our number here as of January 31st. 2023 to what is on the bank statement last time we've been looking at the beginning balance the month one issues with it. And then the additions now we're focusing in on the subtractions the checks and other decreases. Let's go on over and open up our bank reconciliation by going to the banking drop down reconcile reconcile. Let's do some we're going to reconcile here people there's too much tension going on. It's going to be checking account. It's going to be January 31st. And there's no beginning balance here because that's our first reconciliation issue we talked about before we'll get into that more later. Here's the ending balance that we tied out so that's that. And then we're not going to do anything for the service charges and interest continuing on. We already checked off some of the items on the deposit side. I'm going to hide everything that's after January. And you worry we've got that outstanding deposit we're OK with at this point. Now we're on the decreases side of things that decreases maybe as we have here checks or they may be electronic transfers either way doesn't matter. Although there's going to be some differences in the data that we would expect to be coming through on the bank statement. Also as we think about these bank statements you also might think about how the bank feeds will work. If you were to use the bank feeds we'll talk more about that in the bank feed course or section. So here we've got the decreases. So remember we talked about the beginning balance. We then checked off that we have the additions and if the subtractions check off we have to come to the cleared balance which would be correct. That's the idea. Now on the checks or decreases if it's a check that we wrote then we have the benefit of the check number which is nice that can help us to check it off. And we might have like a cancel check which could if we want to get more information on the check that we've got that although we have to go online typically and at least request to cancel check or look or search it out. The date we have as well but that date is not as useful if it's a physical check that was written because it's likely that there's going to be a fairly significant lag between when we wrote the check and then when the check actually cleared it had to be mailed it had to been then deposited into the other bank and so on and so forth and then our bank notified and whatnot. So that's where the issue is now that means in that case we typically want to have a full service accounting system in particular for that case because I want to know if the check was written and outstanding and whether it was cleared or not. I don't want to wait for it to clear the bank before recording it because that defeats the purpose of me being able to see that I wrote the check and then it cleared. However if you have electronic transfers then the date should be pretty close to the point in time that you entered it. So if you had a full service accounting system and you're entering the decreases as you make them then then you would expect they clear the bank pretty quickly and therefore your date is going to be more relevant. You won't have a check number coming through on the bank side of things but you will have a bank memo typically which gives you detail on who you paid and that kind of stuff which can also be useful to help verify the checks. Now of course if you do electronic transfers it's more likely that you could put up a system where you don't enter the transactions first using a full service bookkeeping system but rather wait till they clear the bank and then record them which would in essence be kind of like just using your bank statement to make your books. And that could be more viable given the fact that the memos with the electronic transfers will then show up and allow you to know who you paid so that you can enter the checks and also enter the vendors or add the vendors as you go with the help of the bank date of the bank memo. But that's the general idea so we've got the check numbers here so let's just tick and tie some of these out. So here's on 117 I'm going to look for the number I'm going to look for the amount. Remember the idea being that we're going to go from the bank statement to the books. I'm going from the bank statement to the books because everything on the bank statement should be on the books. If it's not then we're going to most likely have to fix the books unless the bank was in error which it usually isn't. If it's on the books but not on the bank statement that might happen. We expect that to happen at least a couple times possibly for outstanding checks that we wrote which have not yet cleared the bank. That's why you always want to go from the bank to the books or at least think about that as the general process. So here we go 12,000 12,000 is right there. It looks like I missed a check number so this one has a check number we don't have the check number over here but it's the similar date so I'm going to assume that's the same one. I'm going to greenify that greenify it. We've got the 1000 1000 now these two note aren't over here. So I'm going to say man those aren't there what's going on here and I can see that well that looks like it's the difference between that 30,000 and this beginning balance that we put into our books. Meaning these were the outstanding checks you would think that were there entered as of 12 December of the prior year. That that were outstanding that's why my beginning balance doesn't tie out. So we'll get back to that later. So I'm going to say that looks funny because those are not there and they're at the beginning of the month. So I would expect if they were you know there would be outstanding items on my books that aren't here so these are on the bank statement they're not in our books. And so you would think that we have to do something about that we'll talk more about them later. So I'm going to go down to the 16,000 16,000 is here check number 1002 the date is always later on our books. It should be this is a practice problem so I may have made some mistakes but it should always be later because of course the banks not going to know about it. We're going to know about it first we're going to enter the data and the bank will know about it at some point in the future if it's an actual check it'll be fairly further into the future. Depending on who got the check and how long they take before they deposit it. If it's an electronic transfer it'll still be in the future but hopefully like one to three days or something pretty quick. So here's 1003 7000. So 1003 7000 boom we'll just do some ticking some time just shut up and tick and tie here 1005 6892. So 1005 notice that might not be in order. And this is the case because when you have your your bank data on this side they might put it in order by date that it cleared. But if it's an order by date that it cleared that's not necessarily in the same order of date that it was entered because some checks might have cleared you know in out of order from when you wrote them. So you're going to have some discrepancies probably there and like the sequence it might not be in the exact order. That's OK. Don't let that bother you 1005 6892 6892 just just stay focused. I just I got to check that one off. You're not staying focused 726005 or 1006. That's backwards dyslexic a little bit. That's OK. That's OK 72. I see it. I got it going the right way this time. The numbers are there. They're just backwards 1004 37080. So where's that one? Where is that one? I see it. So that one's out of order 1004. OK. So there we got that one. Boom 121007 121007. Mui BN. How are you being? I'm Mui BN. Why just B when you can be Mui BN. I'm 1009 620 620 620. Just keep focused. Stay focused. It's kind of a tedious task here but that's OK. Then we got the 15100111 boom 15000. That looks good. Tick and tie that one off. And those are the normal transactions. Then we have these withdrawal and the bank service charges, which you'll remember when we first started up the bank rec. It asked us if they're withdrawals and service charges, which we could have actually not withdrawals, but service charges and interest. So I could have put that 15 in place when I started. I don't like doing that because I like to have my data and then I'll fix anything after I do the reconciliation. I think it kind of confuses things in other words to enter it beforehand. So in any case, that's what I do. So now we have to account for these. This one I would expect to have to account for it because there's no way we would know how much the bank charged us for just their service fee. They just charge it and take it out of our account and we don't know about it until we got the bank feeds or possibly with the bank feeds or until we have the bank reconciliation. Now the withdrawals, we should be recording withdrawals when we take money out on our side and then verifying them. But sometimes we might not do that. So in this case, we didn't. So we don't have those. So those are two items that are on the bank statement that are not on our books. That means we're going to have to fix our books unless the bank was wrong, which it typically isn't. So I'm going to say, yeah, these are legit. I'm going to have to fix my books. These two are legit, most likely as well, but they have to do with that beginning balance issue. So I'm going to have to deal with that. That's the beginning balance or first bank reconciliation problem that we will have to deal with. So we'll kind of stop it here for now. Note that if we didn't have that first beginning balance issue and once we add these two our books, then we can check and tie everything off. At that point, our beginning balance would tie out. Then we would have our additions tied out and then our reductions would tie out and therefore our cleared balance would tie out, meaning our cleared balance would be 61, 241, 85. That has to work and it will work, although we've got to iron out all those issues with the beginning balance or the first bank reconciliation and the beginning balance of it. So in other words, the cleared balance should match the bank balance once we fix these items, which we'll do in future presentation. Now that does not mean that our book balance, as of the cutoff, as of January 31st in this case, will match that amount. Our book balance on the balance statement will still be different by the outstanding checks. We're just talking about the cleared balance, the ones that we ticked off, the ones that we tied out to the bank statement. The ones that are not ticked off, if I go back on over here, we're not deleting those. They're not going away. They are not invalid transactions. They are transactions that have not cleared as of the cutoff date. Just like we saw with the deposit then, I could go into each of these items here and say, okay, did these clear the bank after the cutoff date? Because when I'm doing the reconciliation, I'm going to reconcile sometime after January 31st, and I can see if they cleared in February. If they did clear in February, then I'm not too worried about these items. I could say they're still valid. I've double-checked them. They've cleared in February. If they didn't clear in February and it's been multiple months since they have cleared, then I've got to say, okay, if this paycheck didn't clear for multiple months, I'm going to have to ask Adam and say, what's going on with this paycheck? It doesn't look like it's cleared. That's when I might want to follow up on it at that point in time. But if it's just one month, it's not really an issue for us, so we're going to leave it there and still say it's valid. And what's it going to do for the bank reconciliation? Well, the months that are checked off are going to be the cleared balance. Everything that's not checked off, quick books when making the report of the bank reconciliation, will show the differences of the outstanding items, which will be the unclear checks and the unclear deposits. That's important not just because that helps us to check up on these unclear items, but because if I know the exact difference between the book balance and the bank statement balance, that gives me a double-check over all of the transactions. And if I can double-check all of the transactions, I'm not only double-checking cash, I'm double-checking all of the other cycles, the revenue cycle, the payroll cycle, the purchases cycle. So that's where we are right now. You'll notice that we're off by 165 here. So 165, if I go down, is the 150 plus the 15. So you might say, well, how can that be? Why wouldn't I be off by, like, where are these two items? Why aren't those in place? And you'll recall that's because we had 30,000 versus the fit 25,000 we had, which is netting out against these outstanding checks right here because these are checks that we wrote in December that didn't clear until January. So that's our beginning balance problem that's kind of netting itself out. That's not the ideal way to fix it, but you could just add these two items and then move forward from there. The reason that's not the ideal way to fix the problem is because I'd like to have these checks in the system as entered as of December and showing as when they cleared in the reconciliation. So we'll talk more about that. That's the beginning balance kind of problem that's unique to the first reconciliation. Typically, we'll see more about that in future presentations. Before we wrap this up, let's just actually add these two items. So I'm just going to enter these into the system here. So I'm going to go back to QuickBooks and I'm going to enter them. I'm going to go to the home page. Usually I like to enter them into the register. So I'm going to go into the list dropdown and go to the chart of accounts. This is the one way you can get there. Double click on the register and I'm just going to enter those two transactions. So the first one was a withdrawal. So I'm going to say, all right, this is as of, I'll make it as of the end of the month, 01.31.23. And I'm not going to put a check number because it's not a check. So I'll just say no check number. And then, so I'll just delete the check number. And then the owner took it out. So you might put the owner, but I'll leave it blank for now. And then it's going to be for 150, 150. Now the question is, what's the account that it should go to? Notice if you take money out as the owner of your own sole proprietorship, usually that's going to be a draw. And you want to make sure that you record the draw as some kind of equity account, which will be a balance sheet account. Otherwise it'll go on the income statement and be affecting your net income. Now sometimes if you're a bookkeeper and you do bookkeeping like for other clients and you're trying to figure out what they're doing, if they're pulling money out and then using it to buy stuff for the business, that becomes a problem because we have no audit trail of it as we do the bookkeeping. So you want to try to talk to your clients and say, don't buy stuff with cash when you buy stuff that's a legitimate expense that you want to record and track so that you can write it off for taxes, you want the audit trail. So you typically want to buy that stuff with credit cards, electronic transfers and whatnot. But if people have a tendency and they just like pulling cash out and spending cash on things, then we don't have the audit trail and you're going to have to give us more information about what it is you purchased with the cash. So that becomes kind of an issue. What we would like to do is say, hey, look, every time I see money that's coming out as a draw, I would like to assume that that is money that you're taking out for personal use and it's not some kind of expense. But at this point, we're going to say that we're going to pretend we asked the client, they said it's an expense. So now we don't know what it's an expense for so I'm going to put it into miscellaneous expense in this case. So we'll say miscellaneous. Do they have a miscellaneous? They don't have one in this thing. So I'll just make an account for it. I'll just say in my SC expense, expense tab. I'm going to set it up and I'm going to put it as an expense account. So I'm going to say, okay, that's it. Now next time we'll put it in as a draw and you can see the difference. So if I add it as an expense, I'm going to say enter and then I go to my profit and loss for the month of January. Now I've got this miscellaneous expense which impacted net income. Now if that was actually a draw, you took money out and spent it for personal use, then it's going to have a negative, it's going to make your net income too low, lower than it should be. It also would be recorded as a deduction for taxes, which would be kind of good for taxes but not correct for taxes. If you have a large account called miscellaneous expense, on say your tax return, then it's likely, you know, that could draw some red flags, right? Because I'm going to say, well, what is miscellaneous expense? And if it turns out the miscellaneous expense were draws or something like that, that becomes a problem. Also note that if you're doing bookkeeping or you're doing your own books and you have a tendency not to be able to distinguish or separate your books from the business books as easily and so you're spending money out of the same account for personal and business stuff, then some of those personal expenses that you have, like if you went on vacation, you went to Disneyland or something like that, then if you wrote it out of your business checking account, you could still just record that transaction as going to draws, not an expense, right? You could still, you'd have to sort out your books by saying that thing that I spent was on personal stuff. Where do you put that on the account? You put that onto the balance sheet as draws as if you took the money out and then spent it on Disneyland or whatever you're doing. So then let's do the other one. So if I go into the reconciliation, I could tick that one off. That was the 150. And then the other one we have here is the bank service charges. And so if I go back into my chart of accounts, I could say as of 131, I'm going to say this is, I'm just going to delete this. And I could say whatever, what's my bank chase or something. I won't put it here. I'll just say 15. And then this is going to go to like service charges, bank fees. So they have an account here, QuickBooks has an account bank service charges. That looks good. I'll keep it there. 131.23. Let's record it. And then back to the reconciliation, so there we have that 15 that has been checked off there. So once again, we're in balance at this point, even though we haven't at this time. So I can let's make this green and let's make this green, even though we haven't ticked off these two. And that's that beginning balance problem. We could reconcile here and just kind of note what happened. But I'm going to talk more about that in the future in the following presentation. So now also note that we did make a change to our financial statements. We've made a change to these accounts on the income statement to reconcile for things on the bank statement that weren't on our books. And we made an adjustment to our cash account. So we did adjust our cash account, but at the end of the day, we don't expect the cash account to be the same as the ending balance here because we do have outstanding checks and deposits. I'm just going to run the trial balance. So you could see where we stand at this point in time with those transactions we just did from 010123. I'm going to run it all the way to 123123 and customize it, fonts and numbers changing it. Let's bring it to 16. So this is for the full time frame. So you could just check your numbers for those changes. This is where we stand as of this time. And we'll continue and finalize the bank reconciliation finally soon.