aka Feels Good For Another Month
In accounting, reconciling your bank account(s) is essential to closing out your monthly accounting book. We will get into the nitty gritty of that next. You or your bookkeeper should not postpone this monthly ritual, or you will have many months to catch up during tax season. If that happens, you may need extra time to catch up and regretfully tell your CPA to file for a tax extension – thus extending your tax anxiety for six more months through October.
1. Gather Your Materials
Step-by-Step:
Bank statement: Have your bank statement (usually the previous month) and internal accounting records ready.
Download: Your bank statement can be found in your online bank account, usually in the “Statement” section.
Linked: Ensure your bank account is linked with your QuickBooks Online (QBO) bank account or Chart of Account (COA) within QBO.
Linking: If your account is not linked. You can do so under the QBO “Dashboards” or “Business Overview” section. Follow the instructions to link your online bank account to QBO. You will need your bank login ID and password.
Important: The above steps are important as the rest will depend on them. Don’t neglect these steps.
2. Access the Reconciliation Tool
Step-by-Step:
Access your QBO: Log into your QBO again if you’ve not done so.
Navigate: Go to the “Reconcile” section; it should be in “Business Overview” within the “Dashboards” section.
Navigate, second act: If the Reconcile section is not there, as Intuit loves to mess with our minds and change things frequently in the QBO layout, try to find it in your left-side menu by clicking each one and going down the menu list.
3. Select the Account to Reconcile
Step-by-Step:
The correct bank account: Choose the bank account you want to reconcile in QBO.
Ending balance: Enter the ending balance, which should be the ending dollar amount on your bank statement. This is a required step to tell QBO that your ending balance is the same as that on your bank statement.
Ending date: Confirm the statement date; this should be the date listed as the end date on your bank statement.
4. Review and Match Transactions
Step-by-Step:
In the Reconcile section: QBO will display a list of transactions from your bank statement.
Eyeball the bank and QBO bank account simultaneously: Compare each bank statement transaction with the corresponding QBO entry.
Put a check mark, first act: Check off transactions that match.
Fixing discrepancies: Investigate any discrepancies or missing transactions. For guidance, please refer to step 5.
5. Adjust for Outstanding Transactions
Step-by-Step:
Save your progress: Before making any adjustments, exit the reconciliation section and save your progress.
Enter missing transactions from your bank statement: Add any outstanding checks, deposits, or expenses not in your QBO into their proper Chart of Accounts (COA). Make sure you have the correct paperwork for those missing transactions, such as restaurant receipts, airline reservation confirmations, vendor bills, or invoices.
Don’t leave out any transactions: Adjust, add, re-date, or re-class all missing transactions in QBO accordingly.
6. Verify Adjusted Balances
Step-by-Step:
Return to the Reconcile section: After adding outstanding transactions, compare the adjusted QBO balance with the adjusted bank balance.
All the bank transactions for the month should be there: They should now match. If not, continue investigating and correcting discrepancies by following step 5.
7. Clear Transactions
Step-by-Step:
Put a check mark, second act (if you recall, 1st act was in step 4): As you verify and match transactions, mark them as cleared in QuickBooks.
Put a check mark, third act: Marking means putting a “check” mark next to the transactions in the “Reconcile” section boxes, which are always on the screen's right-hand side.
You will see why later: This step ensures you’ve accounted for all relevant transactions for the month.
8. Reconcile to Zero
Step-by-Step:
To get to zero: Your aim is to match all QBO balances to the bank balance, which should arrive at zero.
Make sure it is zero: The zero balance will be prominently displayed in the top right corner of the Reconcile section
If it is not zero: If there’s still a difference, review your transactions carefully. Repeat step 4.
Make corrections: Correct any errors or missing entries. Repeat step 5.
9. Finish the Reconciliation
Step-by-Step:
Now it is zero: Click the “Finish Now” button once the difference is zero.
There are still a few “blank” boxes: When your reconciliation reaches zero, and there are still blank boxes to the left side, it means the transactions have not cleared the bank for that month. Leave it as is; they will appear in the following month's bank statement when you reconcile it.
Finalize your reconciliation: QBO will finalize the process after you click the button and create a report. You don’t need to worry about the report – you will not need it until you accidentally make changes to your reconciled account in the future – a step you want to avoid as the ramification is more messy work in the future because the books may not be balanced then. This will be another topic at another time.
10. Review Past Reconciliations
Step-by-Step:
Monthly routine: Regularly review past reconciliations to ensure consistency and accuracy.
Repeat the same steps for another linked account: Repeat steps 1 through 9 for your other linked bank or credit card accounts.
Financial reports: Once your month-end closing is completed, please make sure to export your Profit and loss statement, Balance Sheet, and Trial Balance into PDF format for future reference.
Celebrate: Enjoy a cup of tea, coffee, or any beverage you like. You deserve it, for now, and until next month. Also, thank your bookkeeper!
That concludes this bank reconciliation process.
Feel free to ask if you need more details on any specific step!
Remember, reconciling the books monthly is essential as it tells you if you are in decent shape for the month and indicates your financial reports are reliable as they are reconciled. So go forth, financial maestro, and may your spreadsheets be forever balanced! 🌟📚
Do you have any more accounting queries or need advice on balancing life and ledgers? I’m all ears (well, metaphorically speaking)!
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