Reconciling Accounts in QuickBooks

Gregory J. Cook, EA, CPA+ Accredited Tax Advisor Past President Alabama Society of Enrolled Agents Past President Alabama Association of Accountants

Reconciling My Accounts in QuickBooks

As you write checks, withdraw money, make deposits, and incur bank charges, each of these transactions should be recorded in QuickBooks and then "matched" with the bank's records. This matching process is called reconciling. Reconciling your accounts is a key step to ensuring the accuracy of your accounting records.

Reconciliation in QuickBooks occurs within two windows: the Begin Reconciliation window and the Reconcile window.

Beginning your reconciliation

Some things you may want to consider before you begin your reconciliation:

If this is your first time reconciling this account, make sure you've added all your transactions and your opening balance is correct.

If your beginning balance is different from the balance on your current paper statement, you may need to track down the discrepancy before you reconcile. Click Locate Discrepancies in the Reconcile window to find out how to do this by viewing different types of reports.

Reconciling your account—matching the balances for your paper statement and QuickBooks account—is a two-step process in QuickBooks. First you'll compare the beginning balance on your bank statement to the beginning balance in QuickBooks, and make sure the information for the account you want to reconcile in QuickBooks is correct. Then, you'll compare individual transactions and reconcile your account.

Note: If you clear a transaction directly in the account register, the beginning balance shown in the Begin Reconciliation window may not match the opening balance on your statement. Instead, clear transactions when you reconcile in QuickBooks so you start each reconciliation with a more accurate beginning balance.


Go to the Banking menu and click Reconcile to open the Begin Reconciliation window.

In the Account field, enter or select the account you want to reconcile.
 
In the Statement Date field, enter the date of the bank statement you are trying to reconcile.

Compare the amount shown in the Beginning Balance field to the opening balance amount shown on your statement.
The way you handle a beginning balance that doesn't match your statement depends on whether or not the account has been reconciled in the past.

Some reasons that may cause a discrepancy:

You may have un-cleared a transaction directly in the account register by mistake. If you do this, your beginning balance will be off by that amount. You'll be able to see this in the Reconciliation Discrepancy report.
 
or

You've changed or deleted a previously cleared transaction that you have already reconciled. To fix this, you'll need to undo the previous reconciliation, then reconcile again with the correct transactions.

What to do next

You can find the discrepancy using the Reconciliation Discrepancy report.

If you're able to resolve the discrepancy, click Restart Reconciliation.

If you think your discrepancy might be caused by a previous reconciliation, click Undo Last Reconciliation. Once this process completes, you need to reconcile that particular statement again.

If you don't mind the discrepancy

Ignore the discrepancy for now. When you finish reconciling, QuickBooks adds an adjustment transaction to the Reconciliation Discrepancies account.

Note: It is not a good idea to ignore a large discrepancy. If you do, you'll be adding a large adjustment that you won't be able to account for properly.

Find the ending balance on your statement and enter it in the Ending Balance field.

Enter any service charges or interest earned that you have not already accounted for in QuickBooks.

If the financial statement shows a service charge or interest that you have not yet entered into your QuickBooks records, enter those amounts into the Service Charge and Interest Earned fields.

Important: Do not enter charges you have already entered as QuickBooks transactions.
In the Account field for service charges, enter the name of the expense account that you use to track service charges. In the Account field for interest, enter the name of the income account that you use to track interest income.

Click Continue to open the Reconcile window for the account you've chosen.
Next you'll complete your reconciliation.

Complete Your Reconciliation

Reconciling your account—matching the balances for your paper statement and QuickBooks account—is a two-step process in QuickBooks. First you'll compare the beginning balance on your bank statement to the beginning balance in QuickBooks, and make sure the information for the account you want to reconcile in QuickBooks is correct. Then, you'll compare individual transactions and reconcile your account.
To do this task

You should have completed all the steps to begin your reconciliation.

When you find a transaction in the Reconcile window that matches a transaction on the statement, click the transaction to mark it as cleared.

For each transaction you select, verify that the amount in the Reconcile window matches the amount shown on your statement.

If some amounts don't match or if you find transactions that contain other errors, correct the transactions.
If you find a transaction on your statement that is not shown in the QuickBooks list of un-cleared transactions, enter the transaction now.

(Optional) Click the Modify button if you want to return to the Begin Reconciliation window so that you can change some of your entries.

(Optional) If you are trying to look at a particular transaction on the list, click the Go To button to see details.
When you've finished selecting the transactions, look at the difference amount in the bottom right corner of the Reconcile window:

If the amount is 0.00. Click Reconcile Now. You've reconciled the account with the statement. At this point, you can have QuickBooks print a reconciliation report.

If the amount is not zero. Your account does not balance for the period of time covered by the statement, and you need to correct the difference or, if the difference is not significant, reconcile anyway and QuickBooks will enter an adjustment for you.