QuickBooks organizes your data for you, making bank reconciliation easy. Using cloud accounting software, like Quickbooks, makes preparing a reconciliation statement easy. Because your bank account gets integrated with your online accounting software, all your bank transactions will get updated automatically and each item will be matched with your books of accounts. As a result, the bank statement balance will be lower than the cash book balance, so the difference will need to be adjusted in your cash book before preparing the bank reconciliation statement.
Compare both adjusted balances
Once you get your bank statements, compare the list of transactions with what you entered into QuickBooks. If everything matches, you know your accounts are balanced and accurate. The information on your bank statement is the bank’s record of all transactions impacting the company’s bank account during the past month. Compare the ending balance of your accounting records to your bank statement to see if both cash balances match.
The tricky part is making sure you have the right dates and transactions in QuickBooks so what is variable cost learn why variable costs are important to a business you know everything matches. When you’re done reviewing your statement, you’ll know everything made it into QuickBooks. Before you start with reconciliation, make sure to back up your company file.
Checks Deposited or Bills Discounted Dishonored
- Once the underlying cause of the difference between the cash book balance and the passbook balance is determined, you can then make the necessary corrections in your books to ensure accuracy.
- There are times when your business will deposit a check or draw a bill of exchange discounted with the bank.
- Once you’ve completed the balance as per the bank, you’ll then need to work out the balance as per the cash book.
- There are a few reasons your QuickBooks data may not match your account statements, including bank service charges, checks that haven’t cleared, and transactions that haven’t been entered in QuickBooks yet.
- Since all of your transaction info comes directly from your bank, reconciling should be a breeze.
However, there might be a situation where the receiving entity may not present the checks issued by your business to the bank for immediate payment. Whereas, credit balance as the cash book indicates an overdraft or the excess amount withdrawn from your bank account over the amount deposited. This is also known as an unfavorable balance as per the cash book or an unfavorable balance as per the passbook.
Step 2: Work Out the Balance as Per Bank Side of the Bank Reconciliation Statement
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.
Banks take time in clearing checks, so the bank needs to add back the check’s amount to the bank balance. Journal entries, also known as the original book of entries, refer to the process of recording transactions as debits and credits, and once these are recorded, the general ledger is prepared. 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. These debits made by the bank directly from your bank account will lead to a difference between balances.
This report is useful if you have trouble reconciling the following month. As a result, you’ll need to deduct the amount of these checks from the balance. Once you complete the bank reconciliation statement at the end of the month, you need to print the bank reconciliation report and keep it in your monthly journal entries as a separate document. This document will make auditors aware of the reconciled information at a later date. The purpose of preparing a bank reconciliation statement is to reconcile the difference between the balance as per the cash book and the balance as per the passbook.
Data entry error
When you create a new account in QuickBooks, you pick a day to start tracking transactions. You enter the balance of your real-life bank account for whatever day you choose. We recommend setting the opening balance at the beginning of a bank statement. There are a few reasons your QuickBooks data may not match your account statements, including bank service charges, checks that haven’t cleared, and transactions that haven’t been entered in QuickBooks yet.
As a result, the balance shown in the bank passbook would be more than the balance shown in your company’s cash book. At times, your customers may directly deposit funds into your business’ bank account, but your business will not notified about this the bank statement is received. When your business issues a check to suppliers or creditors, these amounts are immediately recorded on the credit side of your cash book.
