Bank Reconciliation: Purpose, Example, Process

bank reconciliation quickbooks

Your bank may collect interest and dividends on your behalf and credit such an amount to your bank account. Likewise, ‘credit balance as per cash book’ is the same as ‘debit balance as per passbook’ means the withdrawals made by a company from a bank account exceed deposits made. In QuickBooks Online, you can choose to reconcile any of your connected accounts, as well as bank accounts that are not connected. If you want to reconcile your checking account, you would just choose checking from the drop-down menu. You can also reconcile various asset and liability accounts using the reconciliation feature.

bank reconciliation quickbooks

Reconciling a bank statement is an important step to ensuring the accuracy of your financial data. To reconcile bank statements, carefully long-term assets definition and meaning match transactions on the bank statement to the transactions in your accounting records. With QuickBooks, you can easily reconcile bank accounts to ensure that the dollars you record are consistent with the dollars reported by the bank.

  1. QuickBooks will load the statements and facilitate a side-by-side comparison.
  2. For example, if you pay your vendors with a check run on the last business day of the month, none of those checks will have cleared the bank by the time you’re ready to reconcile your account.
  3. Deposits in transit, or outstanding deposits, are not showcased in the bank statement on the reconciliation date.

To reconcile, simply compare the list of transactions on your bank statement with what’s in QuickBooks. Make sure you enter all transactions for the bank statement period you plan to reconcile. If there are transactions that haven’t cleared your bank yet and aren’t on your statement, wait to enter them. After adjusting the balance as per the cash book, you’ll need record all adjustments in your company’s general ledger accounts. When your balance as per the cash book does not match with your balance as per the passbook, there are certain adjustments that you have to make in order to balance the two accounts. As a result of these direct payments made by the bank on your behalf, the balance as per the passbook would be less than the balance as per the cash book.

For example, you marginal revenue product wrote a check for $32, but you recorded it as $23 in your accounting software. Note that this process is exclusively for reconciliations performed by hand. If you use accounting software, then your reconciliation is done largely for you.

Add book transactions to your bank balance

While it reduces the amount of time you need to expend working on reconciling your accounts, the odds of your bank statement and your general ledger matching immediately is pretty slim. It’s not that there aren’t advantages to connecting your bank account to your software, but it doesn’t do all the work for you. The only time the two will likely match is if there’s no activity on the account. For example, if your bank regularly charges you a service fee each month, it will not be posted into your general ledger, leaving you with an inaccurate balance. Assuming there are no other outstanding transactions that need to be posted, once you record the bank service fee in your general ledger, your bank balance and general ledger balance should match. Businesses should reconcile their bank accounts within a few days of each month end, but many don’t.

Cut out manual reconciliation with QuickBooks and Wise

Finally, you need to make sure all transactions are matched to already-entered transactions, or categorized and added if there is no such transaction entered already. QuickBooks will attempt to match downloaded transactions to previously-entered transactions to avoid duplication. The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters. We’ll provide you with a quick reconciliation tutorial, highlight the steps necessary to use this handy feature, and give you a heads-up on what to look out for when using the reconciliation feature. After you reconcile, you can select Display to view the Reconciliation report or Print to print it.

Deposits in Transit

There are times when your business will deposit a check or draw a bill of exchange discounted with the bank. These deposited checks or discounted bills of exchange drawn by your business may get dishonored on the date of maturity. As a result, the bank debits the amount against such dishonored cheques or bills of exchange to your bank account. All of your bank and credit card transactions automatically sync to QuickBooks to help you seamlessly track your income & expenses. If you reconciled a transaction by mistake, here’s how to unreconcile it.

You what is a good return on investment should continue this process until all transactions have been accounted for by following the same process whether your bank accounts are connected or you’ve entered transactions manually. Easily run financial statements that show exactly where your business stands. Access your cash flow statement, balance sheet, and profit and loss statement in just a few clicks. Schedule reports to be generated and emailed daily, weekly, or monthly.

Review cleared transactions

Such errors are committed while recording the transactions in the cash book, so the balance as per the cash book will differ from the passbook. It is important to note that it takes a few days for the bank to clear the checks. This is especially common in cases where the check is deposited at a different bank branch than the one at which your account is maintained, which can lead to the difference between the balances. This way, the number of items that can cause the difference between the passbook and the cash book balance is reduced. And as a result, it gets easier to ascertain the correct balance in the balance sheet. This is a simple data entry error that occurs when two digits are accidentally reversed (transposed) when posting a transaction.


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