Reconciliation: Do you match?

Reconciling QuickBooks with your bank statement may sound mysterious and scary, but it’s really not. All it means is you check your records in QuickBooks with your bank statements to make sure they match. Here’s how that happens:

  1. You get your statement for your accounts at financial institutions: bank accounts, credit cards, money market accounts, etc. (Though some of these places may not technically be banks, I’m just going to use the term “bank” because it’s a nice short word instead of “financial institution.”)
  2. You compare what’s on the statement with what’s in the Reconcile window in QuickBooks.
  3. If something doesn’t match up, you make changes. QuickBooks will help you.

Before you begin

Before you reconcile your accounts, check these things:

  • Be sure you’re up-to-date on entering your transactions in QuickBooks. You know that check you wrote last week for your rent but didn’t enter in QuickBooks? Or the bills you paid but haven’t marked them as paid in QuickBooks? Do that now. Enter all transactions that haven’t cleared or shown up on previous bank statements.
  • The very first time you reconcile, check the Opening Balance transaction on your bank accounts in your Chart of Accounts. They should reflect the amount that was actually in your account when you began using QuickBooks. If it doesn’t you can fix this by:
    • In your Chart of Accounts, open the register for the account (double-click the account name) and change the Opening Balance transaction to match the ending balance from the last bank statement you received before you started using QuickBooks.
    • Or, you can create an opening balance adjustment at the end of your first reconciliation. We’ll get to this later.
    • After your first reconciliation, the Opening Balance should match the Ending Balance from your previous Reconciliation report.

Checking balances, interest, and service charges

When you reconcile and account, you open the Reconcile window, enter information from your statement, and check off cleared transactions. QuickBooks tracks any differences between your account’s transactions and those on your statement.

  1. With your bank statement in hand, open QuickBooks and choose Banking > Reconcile.
  2. On the Reconcile window, select the account you want to reconcile.
  3. Compare the opening balance on your bank statement with the opening balance on the Reconcile window. Do they match? Great! Go to the next step.  If not, it means either that (1) you mistakenly cleared a transaction in the current statement period, or (2) a previously cleared transaction in your register — one dated before the current statement period — was changed or deleted between today and the last time you reconciled. You can handle the discrepancy in one of two ways:
    • Quit reconciling and look for the problem in the Reconciliation Discrepancy report. When you fix the problem, choose Banking > Reconcile again. Your opening balances should now match.
    • Ignore the discrepancy in the opening balances for now. When you finish reconciling, QuickBooks adds a balance adjustment transaction to the register. I’ll talk about working with this type of transaction in a follow-up article.
  4. Enter the ending balance on your bank statement in the Ending Balance field on the Reconcile window.
  5. In the Service Charge and Interest Earned fields, enter any charges and interest listed on your statement that you haven’t already entered in QuickBooks. If necessary, choose an account for that charge from the Account pop-up list on the same line.

Note: The Checks and Payments area at the bottom of the Reconcile windows includes any service charge or interest you enter. When you’ve finished reconciling, QuickBooks enters a cleared transaction for the charge or interest in your register using the date you provide.

Now that you’ve checked these items, let’s look at the transactions.

Mark cleared transactions

If you see a transaction on your bank statement, it’s a cleared transaction meaning that it’s gone through your bank. So your next step in reconciling is to check the transactions you have in QuickBooks with those that have cleared your bank. The transactions in the Deposits and Other Credits area of the Reconcile window are the transactions in QuickBooks that you have not marked as cleared. So that’s what we’re going to do now.

For each transaction in the Deposits and Other Credits area that matches a transaction on the bank statement, click the left column to place a check mark next to the transaction.

Note: If you use QuickBooks’ online banking features to download transactions from your financial institution, some items may already be checked off. You can uncheck any items that do not appear on your statement.

Correcting errors

Mistakes happen. You may have forgotten to enter a transaction in QuickBooks or you may have entered the wrong amount. This is why reconciling is a good thing. It highlights these errors so you can easily fix them.

If a transaction contains an incorrect amount or another error, it’s easy to fix. In the Reconcile window, just double-click the incorrect information to display the original transaction. Now you can correct the error on the original transaction. When you go back to the Reconcile window, you’ll see the correction and can mark the transaction as cleared.

If there’s a transaction on your bank statement that’s not in the Reconcile window, just add the transaction in QuickBooks. You can press Command-R to open the register and enter it there. Or just enter it through other means, such as Customers > Receive Payments to enter a payment transaction. Then you can go back to the Reconcile window and mark the transaction as cleared.

Finishing up your reconciliation

After you complete your reconciliation, the balance in your QuickBooks check register is accurate as of your latest bank statement. The next time you look at the check register, you’ll see a bold check mark in the cleared column next to each reconciled transaction.

When you’ve finished checking off cleared transactions and making any corrections, look at the Difference amount in the bottom-right corner of the Reconcile window.

  • If the Difference amount is zero, you’ve reconciled the current bank statement successfully.
  • If the Difference amount is not zero,  you need to resolve the differences.

Resolving any differences is the topic for our next article on reconciliation. Stay tuned!

About Shelly King

Shelly King works for Intuit as a member of the QuickBooks for Mac team. She’s the Managing Editor for Little Square and its main contributor. Shelly grew up in the South until 1994 when the Internet called her to Silicon Valley. She’s done a lot on the web ever since. Little Square was her idea. Yep, it’s all her fault. See all of Shelly's articles

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