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Here we are in our bank feeds practice file we started up in a prior presentation using the 30-day free trial we also have open the free QuickBooks Online sample company if you want the to open at the same time we suggest using incognito window or another browser to open the sample company you could open incognito if using google chrome by selecting the three dots in the browser incognito type into the search engine QuickBooks Online test drive we're using the sample company to compare the accounting view the one the bank feeds practice file is in and the business view the one the sample company is in you can compare and contrast the two by going to the cog up top switching the view down below we're going to open tabs to put reports in like we do every time right click on the tab up top to duplicate it and right click in the tab up top to duplicate it back to the tab to the middle down to the reports on the left which one do we want the favorite one the balance sheet and if I go into the to the to the sample company in the business view the reports are located in the business overview and then the reports yes they are let's go to the tab to the right then reports on the left this time the income statement the profit and loss the p the l closing the hamburger changing the range oh one oh one two two tab twelve three one two two tab run it to refresh it tab to the middle close the hamburger and those ranges they are changing oh one oh one two two tab twelve three one two two tab run into refreshing and let's tab to the left now we've been working on the bank feeds let's just open up the bank feeds they're located on the left hand side banking bank feeds if you're in the business view by the way the bank feeds are under the bookkeeping and then the transactions and then the bank transactions so now in prior presentations we have been putting together the financial statements mainly from information derived directly from the bank feed constructing our financial statements from the bank feeds we've been focusing mainly on the checking account but then we also put in place a paypal you can do a similar thing and the credit card with the credit card account we did a reconciliation in a prior presentation and we're gonna have a similar kind of issue of course with the checking account this time so let's just do a quick recap of the checking account and how the bank feeds kind of relate to the checking account and we'll take a look at our flowchart to do so so first just want to point out that the checking account is or the reconciliation of it is something that we always want to do no matter what kind of system we're in whether we're in a large company small company cash basis non-cash based system although the process of doing it might be easier or more difficult depending on the size of the business and whether we're using a full service accounting system whether we have a cash based or a cruel based system as well so a lot of times for small businesses as we've seen in the practice problem we are able on the vendor side of things to record our transactions from the bank statement from the bank feeds taking our data from the actual bank itself that might be more difficult oftentimes on the revenue side of things that means on the vendor side of things we're gonna wait till something clears the bank like paying the utility bill paying the phone bill and so on and so forth record it with a check type form or expense type form after it clears the bank that makes the reconciliation quite easy because there's not going to be any timing difference because the timing differences result from us entering the transaction first such as is the case if we were going to write a physical check that we enter into our system versus the time the check actually clears the bank those are the timing differences that make it kind of complex that we have to that we have to deal with in some cases but we don't have those if we're constructing our books from the bank so the bank reconciliation still something i would do but it should be quite easy on the revenue side then we could have a situation that is the same and that if we have like gig work we're getting paid by like youtube we might just deposit stuff into the bank and record it as income with a deposit form when it clears the bank with the bank feeds in which case it would be easy to reconcile again but even if we're on a cash based system if we're at a cash register we saw in prior presentations that we might have to do more of a full service accounting system entering the transaction on our side deposited in it to the bank and then reconciling with the help of the bank feeds and the uh and the reconciliation and if we have an accrual system then of course the bank feeds are not part of the construction of the invoice and so we'll did we'll generally have to enter an invoice and then receive the payment then make the deposit using the bank feeds as a part of a reconciling item to help us uh tie everything out so the bank feeds are kind of helping us to reconcile in those cases all right let's go back on over given that now we've constructed most of our financial statements from the bank feed so if i go to the to the checking account here let's change the range i'm going to go from i think we started at 08 0122 to let's say uh 10 31 22 and then let's see it by month i'm going to go month by month and then run it so here's the ending balance for uh august in our checking account 10 719 96 now if i check that to what's on the bank reconciliation i'm at at the end of august i'm i have a difference here so here it is here here it is here now note that when you get your bank statement some people feel like they don't need the bank statement anymore because they have a running balance in their online checking account you want the bank statement still because the bank fit statements give you that clear delineation from one period to the other whereas if you just look at the running balance you're not looking at it from the same starting point all the time so the bank wrecks are still not still useful with the bank reconciliation now if you started the bank reconciliation or the if you started entering your transaction from the bank feeds constructing your books directly from the information on the bank feeds from scratch with no beginning balance then your ending balance would typically match what's over here on the bank statement that doesn't mean that you shouldn't reconcile it means that in part you've already kind of reconciled because you've constructed your books from the bank but you still want to complete the bank reconciliation which should be very easy in that case because if something happens that the bank balance is off then how do you fix that you fix it with the bank reconciliation that'll help you to get back in into balance so it's still worth just doing even if you're in that simplified system if however you're you have to do more of a full service accounting system writing physical checks or enter transactions to match them to the bank then you might have already done some of the work of reconciling with the bank feeds but you still want to do the bank reconciliation because that will generate the actual bank reconciliation report and help you to finalize the process for the internal control now why is the bank reconciliation so important not simply because cash is important and we want to make sure that we're not we're holding on to the cash and we're not losing the cash it helps with that but it also helps us verify every other account so remember that this checking account if I go into it the detail in here has more stuff involved in it has more types of transactions than any other account it's the most complicated one that's because the checking account is like the life blood the cash it's the life blood of the company it flows through all other accounting cycles so if I can verify not only the ending balance in cash but that all these other accounts are legitimate correct then it not only verifies cash it verifies the other side of the transactions in the double entry accounting system it helps to verify the revenue cycle the vendor cycle the employee cycle so it's really important of an internal control it's the second biggest internal control the first biggest internal control is simply using software like quickbooks why because it forces you to be in balance it forces you to use a double entry accounting system that in and of itself is far and away better than just putting together an income statement by hand not saying that that's not a good you can do that but you have way more assurance that your financial statements are correct just entering it into an accounting system using the double entry accounting system and then if you tack on to that the fact that you're doing a bank reconciliation then the assurance that you're doing things properly or at least that you've recorded everything somewhere is way higher as well so it's important all right so how do we start the bank rec we're going to go to the tab to the left to do so we also have by the way this beginning balance issue like this beginning balance issue that we'll see that 50 000 when we entered the bank feeds we started at some point in time in august that means the beginning balance if there was one before that point needs to be added into the system typically and i would think the easiest place to find that and fix that is when we do the bank reconciliation we've talked about that in the past now we're here now we're dealing with it now it's on the table so let's go down to the to the accounting on the left and then we're going to go into the reconcile if you're in the if you're in the other view the the business view that it's under bookkeeping bookkeeping reconcile experts reconcile that's where it is that's where it is okay back to our thing we're on the reconcile tab notice we're doing the checking accounts this time so i'm on my checking account instead of the credit card account we can reconcile the financial accounts the ones connected to the bank feeds credit card counts and cash accounts the problem here beginning balance is at zero i'm not worried about that i'm not going to try to fix this beginning balance number by putting it into the beginning balance or anything instead i'm just going to check it off as one of the items as i go and just note that in the first bank reconciliation and then we won't have that beginning balance issue going forward i'll show you how that works in a sec so the ending balance we're going to just type in there pulling that that's the sixty thousand seven nineteen sixty nine six oh seven one nine point six nine is that correct six oh seven one nine nine six you dyslexic okay okay i saw it backwards all right shut up that's why we reconcile to fix that stuff that's the whole point so that's why i like the double entry account okay august 31st it's going to be august 31st and let's go ahead and start it okay so now if i close this out the the thing up top is saying this is the statement ending balance this is what we typed in there this is the cleared balance this is everything that has been checked off and the the formula for this balance is the beginning balance which isn't right so in other words it's going to mirror what's on the bank statement the beginning balance is wrong we saw that that's our problem and then we've got the payments so the payments actually tie out and then the deposits which actually tie out here to get us to the ending balance which is off which is this so the cleared balance does not match the statement balance because our beginning balance is off so we're off by exactly that beginning balance kind of issue the balance that was in place before we started you know the bank feeds which we started in august so it worked out perfectly now why why is it working out because everything is automatically checked off already down below why is it all automatically checked off down below because we've connected it says manually added from the bank feeds so all this stuff with these little green things is telling us it has been added from the bank feeds so if if you added everything this thing doesn't delete it's really annoying me i can't exit out x out dang it whatever if you if we added this directly from the bank feeds then and we constructed all of our books from the bank directly then we should have the same date we should have the same numbers in our system because that's the easiest way to construct it and you should be able to go in here and just check it all off and reconcile however possibly not for the first bank wreck because of that beginning balance issue now just note that if for example you have more of a full service accounting system then then it might not work so easily because you might have checks for example that you have written that haven't cleared the bank yet and in that case you're going to have those timing differences so in other words if that happens if this doesn't reconcile then you'd have to uncheck this whole thing basically and then you could go into your deposits and then check this off one by one you'd have to go in here and fix the problem and say okay this adds up to 1359825 that's this amount i'm going to check them off one by one if it's on the bank statement it should be on my books so i'm always going to go from the bank statement to the books but if it's on my books it's not necessarily on the bank statement because it might be an outstanding item in this case it might be a deposit that i wrote and i recorded it when i wrote it but it has not yet cleared the bank so then you would go one by one and say this is the 127755 and where is that 127755 my dates might not be perfect and the practice problem but i'm just trying to give an idea of what in the world is happening 3623 3623 3623 why can't i get rid of this thing why why hopefully they fix that glitch when you here if if they haven't you should you should contact them and express the annoyance express the annoyance to somebody not to one of those phone people because or not to like just some random you know you got to get someone important and then tell them tell them how it is in any case this one's 78363 so there we go and you would take and tie all that off and then if you if you take and tied everything from here to here but you still had some on here that worked on the bank statement it might be the fact that they were outstanding items things that we entered correctly but that didn't clear the bank those are the things that would be reconciling items between the amount that's on our books and the amount that's on the bank statement but in our case we built our books from in essence so i can just check all of them off select all and they should be good to go because the total adds up to 1359825 that adds up to the 1359825 movie b to the end on the payment side same scenario same thing you're more likely to have payments if writing checks of course that would be outstanding more likely than to have some items on our side that we entered properly but which haven't yet cleared the bank due to the timing differences from the checks those would be the items that are the reconciling items but in our case of course we constructed our transactions from bank feed transactions or from from electronic transfers and therefore through the bank feeds so all of this should tie out so it should be as easy as going boom everything ties out these two things are good now there's the 28782828782929 okay now i just got to fix that beginning balance thing so let's save this for later i'm just going to save that for later just like just like some candy or some i don't know i'm saving it for later it's going to be great when i get back to get back to it i'm going to go to the accounting we're going to go to the checking account and let's go into that check register check register check out the reg is stir so then i'm just going to enter this in this beginning balance now if a couple things on the beginning balances obviously if you started your financial statements in the middle of the year then the question is you know did you have the business going before august if so you'd like to have all the all the year's worth of data if it's a calendar year business meaning january through december in the current accounting software so you might want to you know go back and add the detail and so on but uh if i assume that i put my beginning balances in place and that 50 000 then i'm going to put it into equity right i'm going to put it into the equity i'm not going to put income of the 50 000 the beginning balance i'm going to assume it was like an owner investment or it was income that was generated in the past accumulated in the cash account and we're starting our accounting system going forward therefore i'm not going to put it into income but i got to put it on the books in order to reconcile this thing so we can move on forward from this point so i'm going to go to the thing i'm going to say deposit it's going to be a deposit i'm going to do it as of 08 31 22 and i'm just going to say this is the beginning balance it's not going to change the beginning balance uh component in our reconciliation but it will show up so we can check it off and we'll be able to reconcile so i'm going to say this is 50 000 and this is going to be the other side is going to some kind of equity account some kind of equity account is what we need round here round here so you could put it into beginning balance but you don't you really want to typically because that's kind of like a clearing account so you it would typically go into owner investment if you put the money in if it was an investment from the owner and you want to break it out separately or the owner's equity which is like the retained earnings account i'm going to put it into the equity account so i'm going to say save it and boom so now if i check out what happened to the balance sheet i can go into here my my cash account has now been magically uh changed upward to the 60 000 if i go into this account then i can see there's the 50 000 right there deposit form used to do the the deposit and then scrolling back up the other sides in the owner's equity and it's like i can't click on that i can't click on it i want to see the detail why can't i do that because that's the account that they use to close out income to and that somehow messes them up to being able to click on it which is annoying i feel like they should be able to do that but you can check it out anyways by making another report i'm going to duplicate it and say what if i want to look at the detail because something's going on in there there's something more than meets the eye on that one so i'm going to look at the general ledger general ledger so i can drill down on this thing i think you can hide that from me i'll find out what happened this is going to go from 010122 123122 run it and then close in the cash account counts receivable i'm just going to minimize these till we get down to the equities instead of scrolling i find it easier than the scroll method personally but you know do what you want so they're opening balance there it is so there's the activity in the equity so you can check it out that way there's the 50 000 boom all right let's go back to the bank wreck i'm gonna wreck that bank i'm gonna wreck that we're not we're reconciling the bank not wrecking the bank put the sledgehammer down this is the world is going on here so we're gonna reconcile and then we're gonna say resume reconciling and then now it doesn't show in the beginning balance because i didn't put it in that beginning balance thing but i can still just check it off here just check it off bam so now it's like included in the deposits kind of annoying but not a big deal as long as i noted in the bank wreck and then going forward the beginning balance will be correct make sure that this is at zero if it's not at zero then you could force it to reconcile but you don't want to do that because even if it's off by like a dollar it could be because of like 20 deposits and like 300 payments that made it off by a dollar because they netted each other out which means that you're missing not only the checking account stuff but all the other account flows for all the other side of the transaction so you got to make it zero which you should be able to do by just checking it off and finding what the difference is and then fixing it but so there it is so we're going to finish it up and reconcile done and so there there it is so then the history if i go to the history that's going to give us our report so i'm in the checking account reports i want to go into the account right here view it and so it's a pretty boring reconciliation because the top part gives me a summary which usually should match this except for that that deposit is now that beginning balance is now in the deposit area so i want you just got to note that on the first one if you have that beginning balance issue and then that gets us due to the statement balance 60 719 96 and then the book balance which is also 60 000 60 000 where's my balance sheet it's also 60 719 96 so what am i reconciling well nothing because we constructed our books from the bank statement in essence so we don't have any timing differences like we would if we had outstanding checks and outstanding deposits because we entered them first and we're checking them to the bank and the bank didn't know about them because of the timing difference it takes but we knew about them because we did it first but then the bank hasn't figured it out yet because they don't have the information like we have we're in the know we're in the know people tell us first we're in the cool place that we have that like are the trends starts here and then they get it over at the bank but in this case we don't have any timing differences because we constructed it from the bank so it's kind of a boring bank reconciliation but even in that case you still want to do the bank reconciliations because it'll help you to verify all the other transactions help you to verify that you didn't double input anything or not input something and when there is an issue meaning when there is a difference if you end up in a situation where you have a difference at any time from your checking account to what's in your bank balance which should match if you're constructing your bank balance your financials directly from the bank will not match if you're not doing that because of timing differences but if you are this should match out so you might say i'm just not going to do the bank recs but one you're kind of doing the bank recs anyways because you're doing them with the bank feeds and two you still want to do the actual reconciliation because if something gets out of whack if this gets off base if it starts to not line up to what's on your bank balance how do you fix it you reconcile you got to do the bank reconciliation so it should be very easy and those cases in the following presentation will do one for september and just show you how easy it is once you get the first one done if you're constructing your books directly from the bank statements we can just go in there check it have it be completed and move on with our day