Bank reconciliations are one of the most important activities you can undertake to ensure the accuracy of your accounting data. Bank reconciliation simply refers to matching transactions to your bank statement (in QuickBooks) with that those provided by the bank or entered by you or someone on your staff. This process ensures that all the transactions in your bank statements are accurately reflected in your financial records.
QuickBooks adds great convenience and flexibility in reconciling accounting data, but sometimes users experience problems with it. In case you are in the dark on how to reconcile your bank accounts in QuickBooks Online, you should read on because we reveal the art of reconciling to in this cloud accounting software.
QuickBooks Online Bank Reconciliation
In QuickBooks, it can take as little as 5 minutes or as long as 30 minutes to reconcile your bank account, depending on the accuracy and thoroughness of your record keeping. Before reconciling your accounts, make sure all your bank transaction information has been entered into QuickBooks Online. You will also need the bank statement and possibly the bank deposit slips for the month you are reconciling.
With these things completed and in hand, you can now reconcile your bank accounts in three easy steps.
- Log into your QuickBooks Online
- Now, click on the Transactions link located in the left navigation area on the screen, and click banking from the list that open up. You will see an image similar to the one depicted in the figure below.
In the image above, the balance $5,944.03 is the bank balance in QuickBooks and that is the figure that you should reconcile with your bank statement. Just below the area where you see this amount, there is a light blue bar that shows you money that is going out of the bank account. It can be seen under the “spent” column. Money coming into your account, deposits, is shown on the right under the “received” column.
You will want to make certain that all the transactions for the month have been entered. QuickBooks automatically assigns a “matched” or “unmatched status” status when you download transactions from a bank account or credit card company. The matched status means that the transaction is entered correctly in QuickBooks Online and matches what hit the bank account.
Click the gear icon on the top right side of the page, and under XXXX click “Reconcile.”You should now systematically check off the transactions by clicking the corresponding boxes next to each transaction. Click on the individual transactions if you require more detail about a particular transaction. You can also sort the transaction by date, amount, name, or type by simply clicking on the heading.
You will find the running total of items that you have checked off – and therefore reconciled – on the bottom of the screen. This screen proves helpful in comparing the totals on your bank statement with the total in your QuickBooks account.
In case you decide to finish the reconciliation later on, you can choose Finish Later When the balance of the bank statement is tallied i.e. the difference shown at the bottom of the screen is zero, you should click on Finish Now button.
The next screen shows you the reconciliation history and reports list. If you choose, you can print the reconciliation report for your records. The report will come in handy in case of an IRS audit of your accounts.
Issues in QuickBooks Online Bank Reconciliation
QuickBooks Online makes it very easy to reconcile bank accounts. Still, some users find problems in reconciling bank accounts. Here are some of the common mistakes in reconciling bank accounts in QuickBooks online.
- Entered wrong dates for business transactions in QuickBooks online.
- Forget to enter the transaction in QuickBooks Online.
- Entered the transactions twice in QuickBooks Online.
- Entered wrong amounts in QuickBooks Online.
- The bank may not have cleared a check that you have entered in your accounts.
- You may not have recorded a deposit received by the bank.
- Bank may have deducted fees and charges that you may not have recorded in your account.
The above mistakes prevent correct reconciliation of bank account in QuickBooks online. All of these affect the accuracy of the financial records and prevents reconciliation of your bank account.
In case you have marked every transaction in QBO and still the balances do not tally, then this may be due to changing or deleting previous period’s reconciled transactions. This results in change in the beginning account balance in QuickBooks online. The beginning balance will not match with the beginning balance of bank statement. In order to resolve the issue, you would have to obtain and reconcile previous period’s bank statements until the balances tally.
You should always look at the unchecked (items that you did not “check off) items in your QuickBooks Online bank reconciliation. Sometimes you have to pass correct entry in your accounts while other times you have to notify the bank to make correction in its account.
Bank reconciliation is an important activity for companies both big and small. The balance shown on bank statement and QuickBooks Online bank account should show zero difference. Mismatched balance affects the accuracy of the accounting information. This will result in inflated or deflated figures in the company’s financial statement.
The accuracy of financial statement is essential if the management wants to make correct financial decisions. The only way to avoid the problem and ensure accurate representation of your bank account is to perform bank reconciliation on a regular basis. In most companies, bank reconciliation is done every month. Monthly reconciliation of bank account allows you to detect errors early and take appropriate actions to resolve the problem.
Discrepancy in bank accounts is automatically reflected in QuickBooks online. You will know whether the accounts balances tally by looking at the QuickBooks bank account balance. If the QuickBooks accounts balance is equal to the account balance shown in the bank statement then the banks balances are already reconciled. Otherwise, you have to reconcile the two accounts and ensure that both the accounts tally. And you can do just that by following the bank reconciliation process described above.
We hope that you find this article helpful in deciphering the art of reconciling bank account in QuickBooks. Please feel free to share your view regarding Banks reconciliation by commenting in the box below.