Reconciliation is the process of matching transactions you entered in QuickBooks with your bank or card company’s records. It is highly recommended that you reconcile your bank and card accounts in QuickBooks on a regular basis to ensure accuracy of your accounting records. More specifically, reconciliation helps ensure that:
- All your transactions such as payments, deposits, and bank fees are accounted for in QuickBooks.
- All transactions in your QuickBooks bank register, as well as its ending balance, match what you have in your actual bank account.
Before you start reconciling the account, make sure you have:
- Backed up your QuickBooks company file.
- Set up the bank or card account in QuickBooks with the correct beginning balance.
- Entered all uncleared transactions for the statement period.
- Received a copy of your bank or card statement.
The Reconciliation Process
You will come across two main screens as you start and complete the reconciliation process.
The Begin Reconciliation window
In this window, you choose the account to reconcile and review all the information corresponding to it. It is important that all information in this window is accurate before proceeding to the next step.
To go to the Begin Reconciliation window, go to the Banking menu and click Reconcile.
|For customers with QuickBooks Merchant or Payments account:If QuickBooks Desktop detects that you are not signed in to your Payments account, a Sign In prompt will appear. This is to ensure that your account is successfully signed in and linked to a valid company ID.|
- In the Account field, select the bank or card account you want to reconcile.
- The Statement Date is automatically filled in. Usually it is 30 or 31 days after the statement date you entered for the previous reconciliation. You can change it as needed.
- The Beginning Balance is automatically filled in. It is the sum of all previously cleared transactions. Make sure it is the same as the opening balance shown on your statement.
- In the Ending Balance field, enter the corresponding balance from your statement.
- If the financial statement shows a service charge or interest that you haven't yet entered into your QuickBooks records, enter those amounts into the Service Charge and Interest Earned section. Do NOT enter charges you have already entered as QuickBooks transactions.
- Click Locate Discrepancies to see available reports that will help you track discrepancies and other reconciliation issues. You will also be given the option to Undo and Restart Reconciliation on the Locate Discrepancies window.
- Click the Undo Last Reconciliation button if troubleshooting requires you to revert to the previous reconciliation.
Why do I need to undo last reconciliation?
You will normally need to undo last reconciliation when you cannot locate discrepancies during reconciliation or if you want to change the date of the opening balance. Note that when you undo previous reconciliation, your beginning balance will revert to the previous beginning balance and all previously cleared transactions will be uncleared.
- If all information is correct, click Continue to proceed to the Reconcile window.
The Reconcile screen
In this window, you can refine the choices you want to match against your bank statement. This is where you select transactions to clear. If this window shows a zero difference after you select all transactions that appear on your statement, then congratulations! You can simply click the Reconcile button and you’re done reconciling the account.
- Hide transactions after the statement’s end date: Put a check mark in the box if you want to display the transactions covered only by the statement period you are working on. This will help avoid confusion especially if you are “behind” in the reconciliation process.
- The transactions entered in QuickBooks: These are listed and divided into two sections – the Cheques and Payments (Money out) and Deposits and other Credits (Money in). If you are reconciling a card account, the sections are Charges and Cash Advances (purchases) and Payments and Credits (payments to the card company). Check the transactions against what you have on your bank or card statement. Click only the ones that appear on your statement and ensure the amounts are the same. Note that as you select transactions, the Cleared Balance changes.
What if there are too many transactions?
By default, the transactions are listed according to date. If there are too many transactions for the statement period, it may be easier for you to resort transactions, especially if you are trying to find a transaction with a specific amount, reference #, etc.
Click the header/title of the column you want to resort. Clicking it once automatically sorts the transactions. Clicking it a second time reverses the sort. For example, if you want to arrange transactions according to amount, click the Amount column header. The transactions are rearranged in ascending or descending order.
- Items you have marked cleared: This section displays the total number and the total amount of Deposits and Checks you’ve selected. Some bank provides the same summary of transactions on their statement. Looking at this section will save you time if you need to check for discrepancies.
- Mark All/Unmark All: Click either of these buttons to select/deselect transactions. If you reconcile on a regular basis and if all transactions for the statement period were entered correctly, selecting all transactions at once may save you time. Just make sure the reconcile window shows a zero difference between the ending balance and cleared balance.
- Go To: Click this button to open (and edit) the transaction from the reconciliation window. This is helpful if you need to do minor edits on the transaction before you mark it reconciled or cleared.
- Matched: If the account you are trying to reconcile is setup for online banking, clicking this button will automatically select the transactions that were downloaded and auto-matched.
- Columns to Display: Click this button to choose the fields you want to display.
Why do you need to choose columns?
By default, QuickBooks displays the Date, CHQ #, Payee and Amount columns. Except for the Amount column, you can add or remove the other fields to help avoid confusion. For example, if your statement shows the reference # for most transactions, you can choose to display only the CHQ # and AMOUNT columns. This way, you can easily find and mark transactions.
- Modify: Click this button if you have last minute changes on the information you entered in the Begin Reconciliation window.
- This section provides you with a glimpse of the reconciliation figures.
- Service Charge, Interest Earned, and Ending Balance: They are all based on the amount you entered for these fields in the Begin Reconciliation window.
- Cleared Balance: The figure decreases as you select/clear cheques and payments and increases as you select/clear deposit and other credit amount.
- Difference: This gives you the difference between the beginning balance you entered and the cleared balance (the transactions you've selected so far). Ideally, this should be zero.
- Leave: Click this button if you need to go out of the reconcile window to work on another account or to edit transactions.
What happens when I click the Leave button?
QuickBooks keeps track of the transactions you already marked as cleared -- that is, they remain checked in the Reconcile window. When you go to the account register, an asterisk (*) is displayed in the cleared column of the transactions you marked until you complete the reconciliation. The asterisk indicates that a transaction is pending because you haven't finished reconciling your QuickBooks account with your financial statement.
When you are ready to resume reconciling, you need to go back to the Begin Reconciliation window, re-enter the beginning balance and proceed with reconciliation as usual.
- Reconcile Now: Click this button if you are done selecting all transactions.
What happens next?
If the difference is zero: QuickBooks saves the reconciliation and displays the Select Reconciliation Report window. Choose the type of report and then click either Display or Print. Click Close if you do not need any reports at this time.
QuickBooks gives you the option to choose between Reconciliation Summary or Reconciliation Detail report, or select both. Though not displayed after you completed the reconciliation process, the Reconciliation Discrepancy Report is also available in QuickBooks to help you figure out any discrepancy or issue when reconciling the account.
If the difference is anything but zero: QuickBooks displays the Reconcile Adjustment window. The options available in this window are:
If you need to locate the journal entry, you can:
- Return to Reconcile: if you need to go back to the previous window.
- Leave Reconcile: if you need to go out of the reconciliation window so you can review or edit existing transactions that are causing the discrepancy.
- Enter Adjustment: if you want to complete the reconciliation process although you didn’t get a zero difference on the previous window. QuickBooks will automatically enter a Journal Entry under a special expense account called Reconciliation Discrepancies. You can check and edit it as needed by going to your Chart of Accounts.
- Use the Find feature.
- From the Edit menu, click Find.
- On the Find window, go to the Advanced tab and select the Memo filter.
- In the Memo field, type Balance Adjustment and click Find.
- Any balance adjustment will be displayed.
- View the Previous Reconciliation report.
- From the Reports menu, click Banking > Previous Reconciliation.
- If a balance adjustment was made, you will see a General Journal Entry at the top of the report under the Cleared Transactions section.
- Use the Find feature.
FOR CARD ACCOUNTS: If your ending balance is anything but zero, QuickBooks will display the Make Payment window and prompt you to write a cheque or enter a invoice to pay for the outstanding balance. If you do not want to record payment, you can click Cancel.
You may encounter discrepancies as you reconcile your bank or card account. Discrepancies are mismatches caused by transactions in the account that don’t agree with your printed statement. Below are two of the available resources dealing with mismatches and other reconciliation issues.