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Level 1

Starting a bank reconciliation for 2018 without having reconciled 2017

My 2017 accounting requires A LOT of work still to be able to start reconciling our accounts. However, we did things right in 2018 and actually reviewed and matched transactions as we did them, so 2018 is pretty clean. I need to have a clear picture of how we did for 2018 so we can budget 2019, and with a fast growing business, I just have no time right now to work on 2017 until a few months. So I want to reconcile bank accounts from January 1, 2018 on. However, clearly the beginning balance will be off....and therefore I won't be at ZERO for that month. I could easily do a journal entry for the difference so I can be at zero, but I don't know what account that journal entry would be into, and when ready to reconcile 2017, how to offset it/cancel it out so all falls back into place.

Not sure I am being very clear but need help!!



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Level 10

Starting a bank reconciliation for 2018 without having reconciled 2017

You should enter all the correct balance sheet account (asset, liability and equity) balances at 12/31/17. This includes the bank balance. If you are a corp or partnership you can get the balance sheet balances from the tax return.  If you are a sole proprietor, it's not on the tax return, so you'll have to reconstruct the balances. The bank balance is easy because you can use a bank statement, adjusted for open items (eg, a check mailed on 12/31 that cleared in Jan).   You can enter all the balance sheet balances using a Journal Entry.  Assets are debits. Liabilities and Equity (including Retained Earnings and last year's profit) are credits. Of course it should balance. That's why it's called a balance sheet.

To just enter the 12/31 bank balance, you can offset it to Opening Balance Equity, pending later research and correction.  OBE should be eventually be zero.  If there is already a 12/31 bank balance in the books, then enter the difference to force the balance to agree to the statement, adjusted for open items 

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