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Basic banking concepts and common terminologies

Basic Banking refers to manually recording bank transactions in QuickBooks Desktop. Some of the most common terminologies associated with it are outlined here to assist you

ACH (Automated Clearing House) An exchange of electronic transactions between participating financial institutions in the United States. ACH processes large volumes of credit and debit transactions in batches.

Bank Account

Use Bank Accounts in QuickBooks to keep track of your Current, Savings, and Money Market accounts. Add one bank account for every account your company has at a bank or any financial institution.

  1. From the Lists menu, go to Chart of Accounts.
  2. On the Account dropdown, select New.
  3. On the Choose Account Type window, select Bank and Continue.
  4. On the Add New Account window:
    1. Type the Bank Name.
    2.  Select the Enter Opening Balance button and based on your bank statement, type in your Statement Ending Balance and Statement Ending Date. More information about opening balance is available here.
    3. Select OK, then Save & Close.
  1. Go to Lists, then select Chart of Accounts.
  2. Select the + plus icon, to open a new account.
  3. From the Type dropdown, Select Bank.
  4. Enter the Name of the bank.
  5. Fill out the Opening balance and as of date fields.
  6. Select OK.

In QuickBooks Desktop, a bank account register can represent a checking, savings, money market, or petty cash account.

You can enter cheques and deposits directly in a bank account register instead of using the Write Cheques window and the Make Deposits window to create the transactions. Working directly in a bank account register allows you to work more quickly and lets you see the entire record of the account.

  1. Go to the Chart of Accounts.
  2. Double-click on the account to open the register.
  3. Select the blank entry at the end of the register.
  4. Fill out the Date, Payee, and the check or deposit Number fields.
  5. Enter the amount in Payment for checks or Deposit for deposits.
  6. Select the Account you want to use for this transaction.
    • For checks - Use the account you want to track this expense.
    • For deposits - Use the account where the funds are taken from.
  7. You can also enter a note in the Memo field to add more details to the transaction.
  8. Select Record to save the transaction.

Using the business owner perspective, Bank Credit is the transaction that increases the bank balance. For example, you say your bank was credited if money is deposited to it.

Using the business owner perspective, Bank Debit is the transaction that decreases the bank balance. For example, you say your bank was debited if money is taken out from it.

Written order to a bank to pay a stated amount from the drawer’s account. Cheque numbers are unique per bank. Cheques are considered good as cash. For details refer to Create, modify and print cheques.

Credit card gives the holder an option to borrow funds for purchases or for paying bills. If you have a credit card that you use for your business, you can Set up, use and pay credit card accounts.

You need to Deposit customer payments into your bank account. A complete list of deposits will help you reconcile the account correctly.

Electronic transfer of money from one bank account to another, either within a single financial institution or across financial institutions through computer-based systems and without the direct intervention of bank staff.

Small amount of cash on hand that is used for paying small amounts owed, rather than writing a cheque. Petty cash is also referred to as Petty Cash Fund. You need to put money into petty cash or a cash drawer so you can start using it to record your expenses.

Reconciliation is the process of matching transactions you entered in QuickBooks Desktop with your bank or credit card company’s online statement. To learn more, see Reconcile bank and credit card accounts.

Bank routing number or routing transit number (RTN) is a nine digit number used to identify a financial institution in a transaction. It's usually printed at the bottom left side of your cheques.

You can transfer funds between checking, savings, and money market accounts in your chart of accounts.

  1. Go to Banking menu, then select Transfer Funds.
  2. Fill out the required fields:
    • From account - The account the funds come from.
    • To account - The account the funds go to.
    • Amount - The total amount to transfer between accounts.
    • Date - The date that shows when transfer is recorded.
  3. You can also add a note in the memo to add more details.
  4. Select Save or OK.
    Note: If you need to create multiple transfers, select Next. This saves the current transfer, then clears the field for you to fill up.

QuickBooks uses Undeposited Funds to hold payments awaiting deposit. These can be cash, cheque or charge and are often stored in a cash drawer, bank bag or electronic batch. By default, Undeposited funds is turned on. You can change it by going through the Payment Preferences (Edit > Preferences > Payments). To know more, refer to Understand how the undeposited funds account works.

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