## Bank Reconciliation: Reports, Errors, Corrections & Managing Accounts ##

1. Chapter 4 Bank Reconciliation 175

2. Objectives • Reconcile your checking • Create bank reconciliation reports • Finding errors during reconciliation • Correcting errors found during reconciliation • Make corrections when QuickBooks automatically adjusts the balance in a bank account • Handle bounced checks • Reconcile credit card accounts and record a bill for later payment • Set the Beginning Balance field on bank reconciliations for new accounts 175

3. Objective 1. Reconcile your checking

4. Reconciling Bank Accounts • Each month, you should reconcile your QuickBooks bank account with the bank statement to identify and correct discrepancies between your records and the bank’s records • To reconcile a bank account • Open the account register in the Chart of Accounts • Select the Banking menu, and then select Reconcile • Check Beginning balance with the bank statement • Enter statement date, Ending balance, service charge and Interest earned 175

5. Reconciling Bank Accounts (cont.) • In the Reconcile window • Match the deposits and other credits on the bank statement with the deposits in the Deposits, Interest, and Other Credits section (click on each line to mark it as a cleared transaction) • Match the checks and other withdrawals on the bank statement with the ones listed in the Checks, Payments, and Service Charges section (Click on each line to mark it as a cleared transaction) • After you’ve clicked next to each check and deposit, look at the Difference field which should be 0.00, indicating that your bank account is reconciled • Click Reconcile Now 175

6. Objective 2. Create bank reconciliation reports

7. Bank Reconciliation Reports • After a successful reconcile, Select Reconciliation Report window is displayed • Select Summary or Detail option • Click Display to view the report • Click Print to print the report • To create bank reconciliation reports at any time: • Select the Reports menu, select Banking, and then select Previous Reconciliation • If you are using QuickBooks Basic or QuickBooks Pro, you can create Bank Reconciliation reports for the most recently reconciled month only 184

8. Objective 3. Finding errors during reconciliation

9. Finding Errors during Bank Reconciliation • The Beginning Balance Field error: • One or more reconciled transactions were voided, deleted, or changed since the last reconciliation • A user removed the checkmark from one or more reconciled transactions in the account register since the last reconciliation • Incorrectly Recorded transactions • Discrepancy between a transaction in QuickBooks and a transaction on the bank statement 186

10. Objective 4. Correcting errors found during reconciliation

11. Correct Beginning Balance Error • Option 1: Use the Reconciliation Discrepancy Report to Troubleshoot • Select the Reports menu, select Banking, and then select Reconciliation Discrepancy • Review the report for any changes or deletions to cleared transactions • Enter the corrections for reconciled transactions using the report • Option 2: Undo the Bank Reconciliation • Select the Bankingmenu, and then select Reconcile • In the Begin Reconciliation window, select the bank Account and click Locate Discrepancies • Click Undo Last Reconciliation • When the undo reconciliation is complete, QuickBooks displays a completion message, click OK 186

12. Edit Incorrectly Recorded Transactions in Current Accounting Period • If you made the error, double-click the transaction in the Reconcile window, make the correction and return to Reconcile window • If the bank made an error, enter a transaction in the bank account register to adjust your balance for the error • To void a check, double-click the transaction in the Reconcile window, select the Edit menu and select Void Check and then return to Reconcile window 190

13. Edit Incorrectly Recorded Transactions in Closed Accounting Periods • To correct your error: • Enter a reversing entry in QuickBooks using the date of the current bank statement and same account that you used on the original transaction • The two transactions cancel each other out • Both the original transaction and the reversing transaction will show on the Reconcile window, clear both transactions • Next, enter the correct amount in a new transaction using the date of the current bank statement • You must clear the new transaction in the Reconcile window for your reconciliation to work properly • To correct bank Error: • Enter the adjustments as you would if the transaction were in a current period • Use the date of the current bank statement for both adjustments 190

14. Objective 5. Make corrections when QuickBooks automatically adjusts the bank balance

15. When QuickBooks Automatically Adjusts your Balance • If the difference is not zero when you click Reconcile Now in the Reconcile window • QuickBooks creates a transaction in the bank account for the difference • The transaction is coded to the Opening Balance Equity account • You can’t leave this transaction in the register because you should never have a balance in Opening Balance Equity after setup, it usually indicates an over or understatement in net income • To Correct the problem: • Delete the transaction that is coded to Opening Balance Equity • Undo the Last Reconciliation • Perform the bank reconciliation again correctly 193

16. Objective 6. Handling bounced checks

17. Handling Bounced Checks • When Your Customer’s Check Bounces • Receiving and Depositing the Replacement Check • When Your Check Bounces 193

18. When Your Customer’s Check Bounces • Bounced checks are also know as NSF (non-sufficient funds) transactions meaning there are insufficient funds in the account to cover the check • When customer’s check bounces, add two new transactions to your bank account register: • one for the amount of the check that bounced • one for the fee charged by the bank • If you charge your customers a service fee for processing their NSF check, enter an Invoice to the customer 194

19. Receiving and Depositing the Replacement Check • Select the Customers menu, and then select Receive Payments • Make sure you apply the payment against the original invoice and the service charge invoice Click Save & Close • Select the Bankingmenu and then select Make Deposits • Select the check and then click OK • In the Make Deposits window, click Save & Close to deposit the replacement check 197

20. When Your Check Bounces • Enter a transaction in the bank account register and code it to Bank Service Charges using the actual date that the bank charged your account • If your balance is sufficient for the check to clear, tell the vendor to redeposit the check • If your balance is not sufficient, consider other ways of paying the vendor, such as paying with a credit card • If your vendor charges an extra fee for bouncing a check, enter a Bill (or use Write Checks) and code the charge to the Bank Service Charge account 199

21. Objective 7. Reconcile credit card accounts and record a bill for later payment

22. Reconciling Credit Cards Accounts and Paying the Bill • If you use a credit card liability account to track all of your credit card charges and payments, you should reconcile the account every month just as you do with your bank account • The credit card reconciliation process is very similar to the bank account reconciliation, except that when you finish the reconciliation, QuickBooks asks you if you want to pay the credit card immediately or if you want to enter a bill for the balance of the credit card • If you don’t want to pay the whole amount due on a credit card, edit the original Bill to match the amount you actually intend to pay 199

23. Objective 8. Set the Beginning Balance field on bank reconciliations for new accounts

24. Setting the Beginning Balance Field on a New Account • If you enter the opening balance in the New Account window, QuickBooks will automatically copy the opening balance to the Beginning Balancefield in the bank reconciliation feature • However, if transactions are already posted to the account, you will need to enter the opening balance directly in the account register or in a General Journal Entry • When you do so, QuickBooks will not automatically copy the opening balance to the Beginning Balancefield in the Bank Reconciliation feature • Extra steps are required to reset the Beginning Balancefield in the Bank Reconciliation feature so that it reflects this opening balance 202

25. Summary of Key Points • Reconcile your checking • Create bank reconciliation reports • Finding errors during reconciliation • Correcting errors found during reconciliation • Make corrections when QuickBooks automatically adjusts the balance in a bank account • Handle bounced checks • Reconcile credit card accounts and record a bill for later payment • Set the Beginning Balance field on bank reconciliations for new accounts 205