Transcripts
1. QuickBooks Online 2021 #3 Bank Reconciliations: Quickbooks Online 2021 number 3, bank reconciliations is a project-based course focus in on the bank reconciliation process using QuickBooks online. If you do not have access to QuickBooks Online or you would like to clean a copy of a software that doesn't have your current company file in it, you may be able to get access to a trial version, often offered for free by intuits. To look into that, you might try searching QuickBooks online, free trial in your browser, or possibly looking into this link. For that information, we're going to be focusing in on two months of bank reconciliation. First month bank reconciliation usually being a little bit more difficult. We'll talk about the difficulties often faced during that process. The second month, the bank reconciliation typically be an easier typically reflecting the standard process after that first month has been completed. Going forward, we have information on the right-hand side and the resources which you can download. One being a backup file that can be restored and transferred into the QuickBooks Online Version, given us data that we can work with. The other being resources that we can download to check our work and help us to work through the practice problem. The final project will be the bank reconciliation reports.
2. 9.05 Bank Reconciliation Myth Busting: Quickbooks Online 2020, one, bank reconciliation, mythbusting. Let's get into it within two. It's QuickBooks Online 2020 one. Here we are in our get great guitars practice file. We're going to be going into the bank reconciliation process. But before we do so, we want to discuss some common misconceptions about the bank reconciliation process, which we can characterize as myths about the bank reconciliation process and any good myth, we'll have some element of truth within it, but then it's going to take a wrong turn somewhere. And many times the wrong term that will be taken, be characterized or will be about or around the topics of one bank feeds the idea that somehow the bank feats has fundamentally changed the concept of the bank reconciliation process. And number 2, that the process of reconciling is actually what the bank reconciliation is and they're actually kind of two different things. We have the reconciling process and then the bank reconciliation. So let's first just kinda recap. The process here is to do this. I'm going to be opening up some reports. I'm going to go up top. I'm going to right-click on the tab up top. Duplicate. The tab up top will be opening up. Then our balance sheet here go into the reports down below, opening up the reports, we will then go into the balance sheet, opening up our favorite report, the balance sheet. We're going to range change it at the top, Indian at the a 130 one to one. So we're ending at the end of January. We're going to run that report and then close up the hamburger hold down Control scroll up just a bit. We of course are focusing in on the cash account. So the bank reconciliation is going to be a huge internal control. We really want to do the bank reconciliation because it's giving us an outside check on the cash account. And cash is kinda like the lifeblood of the accounting system. It's involved in every other cycle so we can verify the cash. Then we have a good internal control, not only over cash but over other operating cycles as well. The basic idea, bank reconciliation is that we want to take a point in time and typically the end of the month is what's going to be chosen because that's when we have our summary information and verify out what's on our books to what's on the third party books, the bank's books, the bank who ideally is entering our information related to our cash account independently from our books. If that were the case, then we're checking a second outside source against our books and we're getting kind of a double verification if we can reconcile between the two. Meaning, here's our amount on our, in our books. If I take a bank statement and here's our mock bank statement, it's an Excel, this is our mock bank statement. And as of the same point in time, let's just say for the purposes of this practice problem, the bank statement is saying that we have 89335 in the bank account. Well, these two things do not line up. That's not going to be unusual if we're doing a full-service bookkeeping system due to the fact that we could have outstanding checks and outstanding deposits. That's really what we're looking for. We're looking to find those outstanding checks and deposits so we can determine exactly what the difference is. And by reconciling that difference, we're not trying to change those outstanding checks are deposits were just trying to say what the timing difference is because if I can tie exactly in to what the timing differences, then I know that the bank has recorded basically the same information that we have since they're doing it independently. That gives us a third party double-check that we have inter things correctly. Now as we do that, usually there's going to be kind of issues along the way. We might then make some corrections to our books per possibly for items that are on the bank statement that are not in our system and we'll have to add them, but at the end of the day, we're still not going to tie out to the bank if we have a full-service accounting system, most likely because we'll have the outstanding checks and deposits. The reconciliation then gives us that verification that although we have that timing difference, then we still have that double-check were still correct because we can tie exactly in to what is on the third party bank reconciliation. Now one of the problems that comes into play here is that we could enter our data into our system in a couple of different ways. Meaning if I go back over to the desktop version, you don't need the desktop version here, but I just want to take a look at the flowchart within it on the homepage. So if I go to the desktop version homepage just to look at the flowchart. We talked about different methods that we can start to enter the information into the accounting system. If I use a full-service accounting method, meaning an accrual method, for example, where I were on the sales side, I enter an invoice and then I received the payment from the customer and then I make the deposit into our bookkeeping system. And I do all that independently from what happens in the bank. Then the bank reconciliation process is going to be a process of verification because I entered it into our books. We introduce into our books independent from what the bank is doing. And even if we're on a cash basis system, we can still run this double-check process. Meaning if I was on a cash basis system for the revenue cycle. Then when I get the money, like if I'm at the cash register, they'd give me the money. I would then record the create sales receipt, which is a cash method item I collected the money, got to work at the same time, recorded revenue at that point in time. And then I would take that money and deposit it into the bank. Once again, even though on a cash basis system, I'm independent from the bank. I recorded my books, we recorded our books under that system, independent from anything the bank is doing. And then we took our money and recorded it into the bank. So when the bank then gives us their bank statement at the end of the month, they have done their work independent from our work. And that's the best check because now it's a third party that's doing the same thing that we are basically for cash. And that's when the reconciliation is at its most powerful, the strongest. However, we can't have a system where we're not creating our books independent from the bank. For example, I might just take the bank statement at the end of the month and just say I'm just going to take what's on the bank statement, for example, I'll take this bank statement and I'm just going to take the deposits in and assume that that's revenue. Put that into our books, basically recorded as revenue. And then all of the deductions, I'm going to put that into our books straight from the bank statement into our books. Assume that that is going to be some type of expense and I'll categorize those expenses. I could do that manually just taking the bank statements and intranet into our books in that format, which would be useful in might be done, might be a good process to help us to generate the information we need, say for taxes at the end of the year in financial statement information. But it's a little bit different than of course, a full service system. Now I'm dependent on the bank. So I could do that directly from the bank statements or I could use bank feeds to do that. If I have a simplified accounting system here. And I'm just saying, hey, look, if it's gig work or something like that and I don't need to invoice anyone. And I don't need to like, batch up my sales at the cash register and deposit it or anything like that. I'm just getting paid by an online marketing service or an online app store for classes. If you're teaching classes or YouTube is paying your or Google's paying your, Amazon is paying you. And I'm just gonna get the money and then record it as revenue. When it hits my account, then I can just, I can just wait till it hits the bank. Now if I do that, once again, I'm not on not on simply a cash-basis system. I've kind of taken even a step further and simplification than a cash-basis system. Because a cash-based system would still imply that we enter the information independent from the bank and then double-check it to the bank. But now we have a system where we're just saying, hey, I'm just going to wait till it clears the bank and then take the information from the bank and put that into our books directly. So we've taken another step in simplification. Now, if that is the system that you have in that way, then you're not going to have a difference in a timing difference between what's on the bank's statement and what's on our books in that case, because we made our books directly from the bank statement. So in that kind of system, you will have, you will have no difference typically from the bank and the books, but you still want to do the bank reconciliation. The bank reconciliation will not be as powerful because you're not doing a double-checking system. However, you are checking that you have you have taken all the information from the bank and entered it into your system. You're double-checking that you haven't entered anything two times and you're double-checking that you haven't missed anything, that somehow the bank feeds didn't pick anything up. So if you're using that kinda more simplified system or taking the information directly from the bank, it will simplify things and make the bank reconciliation kind of weaker in an internal control. But it's still something that's going to be necessary to do. Note that if you're using bank feeds, you may not have that simplified system in any case as well. The fact that you're using bank feeds doesn't mean you're dependent on the bank. So if you're using bank feeds and you still need to record invoices, Then the bank feeds can't be used in the same kind of fashion. You're still going to have to record things basically independently. And then you can use the bank feeds to kinda tie out and match. And that's going to be the second kind of issue with the bank feeds. That kind of confuses the bank reconciliation process. And let's see if we can tie that down. That has to do with the reconcile Lean process versus what a bank reconciliation is. So what is a bank reconciliation? I'm going to look at a report here on, on the desktop version. Again, we discussed the fact that the bank reconciliation is basically just saying, here's what's on our books as of this point in time and reconciling to what's on the bank statement, which would be this in our example problem. And the difference being outstanding checks which we would have if we're running things independently due to timing differences, outstanding checks and deposits. So if I, if I minimize this then, and if I look at this example on the desktop version, just to take a look at an example of a bank reconciliation, the desktop version, this is their summary report here we'll do a similar thing on the online version. We basically have the cleared balance, that's basically the bank balance, that that's what would be on the bank statement. And then we have the unclear IRD items with these would be the checks that we wrote that have not yet cleared and the deposits that we made that have not cleared the bank yet. We knew about them. We wrote the checks and if we're doing our books independently, we wrote the check. We decreased our checking account when we wrote the check. But whoever received the check's going to have to get it as gonna have to deposit it. There are banks can have to talk to our bank. Therefore, the bank doesn't know about them yet. And that's what the reconciliation difference is. That's why we have a difference in the balance as of the same point in time. Because of a difference in information, a timing difference. And that reconciliation, that timing difference will tell us exactly if we can reconcile exactly what the difference is, then not only verifies or tells us what the timing differences we're not so concerned. In other words, with these outstanding items. Then with the fact that if I know exactly what they are, I have now verified all the other items in the system. That's basically what our goal is to do. Now, the summary report isn't as good because it doesn't tell you exactly what those items are. Just says, hey, there's five items. So then we have to go to the detailed report over here and that'll actually show us what the what these five items are. I'll go into that more, into more depth when we actually go into the presentation about doing the bank reconciliation. But just realize that, that these are the things that we're after is this reconciliation item and that kind of verifies and double checks that the whole the whole accounting system is correct. So this is actually the bank reconciliation report. This is what we're after. If you've got an auditor comes in and they say, Hey, I want to verify your bank reconciliations. This is what they're looking for. But a lot of people confuse that with what the processes of reconcile lean and which the bank feeds can kind of help with. So the process of reconciling and let's jump on over to the, to the desktop version. Say go to the first tab, I'm going to hold down Control, scroll down to get down to that 100%. It when we reconcile, we're going to go down to the, to the accounting tab down below, and then I'm going to go to the reconciled tab up top. Usually you're in the chart of accounts. We're gonna go to the reconciled tab. I'm going to hold down Control scroll up just a bit, close the hamburger. And then it says, which account do you want to reconcile, typically the checking account. And then we've got this issue with the beginning, balance, this with the first bank reconciliation, which we'll talk about in the next presentation, is often an issue that this beginning balance doesn't tie out to what's on our books, because it should be 30000 and it's in here at 0. So we'll deal with that more next time. But just if I was to go forward with a bank reconciliation process, the ending balance I would take from our bank statement 89335 and this example, so 89335. And then the Indian date, I'm going to say is the end of January, so January 31st. And then it says enter any service items. So service charge, if we have bank feeds, I don't like to do it in this format in the bank reconciliation. So these are adjustments for items that are often on the bank statement that we don't have in our books yet. We'll talk more about that later, but I don't like to enter them here. I like to enter them directly into the into the register, so we'll do that later. And then if I start the reconciliation, then it takes us to our reconciliation screen, which we'll talk more about later. But notice what's happening here is we're just basically going to tick in, tie off what is on the books. This is what's in basically are our transaction in the books is on the bank over here. We're going to take and tie this off to what is on the bank and we'll do it line by line. There's, there's 50000 there. We'll come over here, we'll check off the 50 thousand. Here's 65000 here. We'll come over here and we'll check off the 65 and so on, so forth will actually tie this out. Now when I tie this whole thing out, we're going to come up to a different SAP top of 0. And that's how I know I'm going to be reconciled. That's when we're going to be reconciled. The things that we do not check off here will be the items that will be outstanding. So this process of reconcile lean in getting this thing down to 0 isn't important thing. If we do that, then we're basically doing a very important internal control. However, doing this, doing that process is the process of reconciling that if an auditor came in and said, I need to verify your bank reconciliations, they're not going to want you to see this checking off. And then making this go down to 0. They're going to want to see the report of the bank reconciliation we talked about just a second ago. This is the process of reconciling to get there. So it's good that we do this and if this comes down to 0, then we've done, we've done the reconciling the process. But the report that's going to be generated is going to show the items that we didn't check off. Because those are going to be the ones that are going to show us the difference between the bank account and what is on our books. And that's really, that's really kind of what we're after. So people will often then do this bank reconcile Lean process which is important even if we don't ever look at the report. And because we do reconcile it in that format. But the idea is that that's what we're after. We are after that reconciling process and we're after that by the things that we don't check off because those are going to be the things that are going to be outstanding. And that'll become more clear when we actually go through the process of reconciling process and generate these reports. But this again kinda ties into the bank feeds. Kinda myth here. Where were the bank feeds will help us to tie these out. Because for example, if I get, if I'm building my books from the bank statement, jumping over to the desktop version. If I'm just saying, I'm building my books, not by me doing the data input, but just from the bank feeds. I'm just creating my books from the bank feeds. Or even if I'm doing my own books and then I'm matching my data to the bank feeds as they come in, meaning I make the deposit myself independent from the bank. And then when the bank feed comes in, I match it to the bank, I match it out. Well, that matching process is the process of reconciling. That's basically what we're doing in the reconciling process, right? We're tying out what's on our books to what the bank did. Ideally, we would like to do that independently. We enter it independently. The bank feeds flow into our system and we can match the two out. And we're basically doing the process of reconciled lean like automatically as we do that. So that, that bank feeds help us in the process of reconcile lean. But that's different than the actual report. That report is the bank reconciliation. So after that reconciling process is done, then we should have a bank reconciliation. So in other words, if I, if I use the bank feeds, it might help me then when I get to this bank reconciliation report to do the actual bank reconciliation, All of these might be checked off like automatically because when I enter the bank feeds, the system was able to match out the bank feeds to what's in our books, which is great. All of these would be checked off and I can then reconcile my report a lot easier hopefully with the bank feed. That might that might make the system faster. But the bank feeds helped me to do the process of reconciling lean so that I can then make the bank reconciliation. They haven't made bank reconciliations obsolete. They've, they've, they've made it possibly faster to go through the process of reconcile lean so that we can create the bank reconciliation more quickly. Okay, so hopefully that made some sense. We'll go into the bank reconciliation process in future presentations.
3. Transfer Data From QuickBooks Desktop Backup File: Quickbooks Online 2021 transfer data from QuickBooks Desktop backup file, so that we have starting numbers in a QuickBooks Online account. Let's get into it within two. It's QuickBooks Online 2020, one, here we are on our desktop. Our objective is to set up a new QuickBooks Online a file, and then take the QuickBooks Desktop backup file that we see here and take the data from it as our beginning numbers in our new QuickBooks Online file. And we would like to do this for free. Our assumption is going to be that you don't have access to the desktop version or the online version. Therefore, we're going to utilize in this process the free 30 day trial for both the desktop version and the online version. So a couple of caveats here. If you do have the latest version of the desktop program, you can kinda skip forward to that point when we go from the desktop version to the online version. However, if you have an older version of the desktop version, you might be thinking that you could skip forward, but you may not want to. You may still want to do the same process to get the free 30 day trial of the latest version of the desktop program and then take your backup file here or create a backup file that you're using this with your own data from your prior version software, restore it to the latest version, QuickBooks, so that you have the latest version which is most likely to convert over as easily as possible when we convert the data to the QuickBooks Online process. So that's going to be the general process. We will then download the 30 day trial of the latest version of QuickBooks Desktop will restore our backup file to that latest version of a desktop version. Then we'll use the kind of process within the desktop version to link to the online version. In our case, setting up hopefully a free 30 day trial for the online version. However, you could just set up a new company file and pay for the online version at that point as well. Also note that we are doing this basically as starting points for practice problems where we would like to have the beginning balance in place. Therefore, if you're doing this for a course, just note that the file name might not be the same, but the process will. So let's go on over to QuickBooks online just so we can see it. This is the Intuit website. Our goal is to set up free 30-day trials, will have to do it for both online and desktop to make this process work. So just to see with a 30 day trial is in the in the Intuit Online at this point in time. It's at I NTU IIT.com, Intuit.com. That's the owner of QuickBooks. I'm going to go into the QuickBooks item or icon. And then we're gonna go all the way down to the bottom where our products are. And then I'm going to go into the QuickBooks Online. So we'll go into then the QuickBooks Online. And you can see down below, they typically have this free 30 day trial. So that's we're still going to try to get access to that free 30 day trial in our practice problem here. But we have to do it as we set up the information from the desktop version and convert it over. So therefore, our first step is not to open the free 30 day trial here, but rather to then open up the desktop free 30 day trial and then, and then take our company file. So we're going to then type in to your favorite QuickBooks Desktop free trial. I find that it's easier to actually look in your favorite browser like a Google or something like that then actually on the Intuit website, I'm not sure why that is the case. It typically is that we will be going to an intuit or QuickBooks owned site for the free trial. So we're then gonna say, okay, then typically will have something that download a free trial of QuickBooks Desktop. So remember we're looking for the desktop version here, even though we will then be going into the online version later, because we want to convert the data files. I'm going to go into this item. I'm going to download the latest version of the Desktop pro. So I'm going to go down. It says QuickBooks Pro 2021. That's what I want. It has the license number down here, which you may need to activate the software. So then we're going to click on that item. And then the QuickBooks Pro starting machine runs down here. This is the actual program. I'm in Google Chrome. That's why it's going to pop up down here. If you're in like Firefox, that download item might be up top and so on. Then you're gonna run that. Now I'm not going to go through the running process. It can't take some time. It's a fairly large program, QuickBooks. So just be patient with it. But I won't go through the whole process of running it at that point. At this point, that'll take awhile. Instead, we're going to say at the end of the time period when you run it, you will then have an icon that's going to be QuickBooks Pro. It may not be ProPlus just pro would be fine. 2021. So once again, we want the latest version because that'll make the transfer from the desktop to the online as easy as possible. And if you don't have the latest version and you're doing this for some other purpose than you might want to take your data file, make a backup of it from your data file, then do the process we're doing here with the latest version so that you can have the best chance of your data converting over as good as possible. Then we're gonna open up this file. We're gonna open this up so that we can backup or restore this backup file. And we're going to restore it to this folder. Gets a little bit confusing. We got a couple of things going on here. We've got this is going to be our QuickBooks file. This is our backup file with the data in it kinda like a Word document as compared to Microsoft Word. Once we restore the backup, though, because this is condensed, we will unpack it and create another file, which is going to be the actual writing file, that QB o file, which I'm just going to put in this folder. So let's go ahead and do that. I'm going to go into QuickBooks. Typically, if you have a company file open, you can close the company file by going into the file drop-down and then go and down to close the company file. So I'm gonna go ahead and close our company file. And then you'll typically if this is the first time you've ever opened QuickBooks, you'll be in this intro screen. And this will be the typical kind of intro screen. From here, we can create, we can open or restore a company file down here. I like to do it from the file drop-down, up top. So I go to the file drop-down, open or restore a company file. We're going to restore a company files. So we've gotta go to the second option that I'm going to say Next. And it's going to be a local item. That means it's on our desktop. So I'm going to say next, then I'm going to find it on the desktop. So I'm going to say desktop and there it is, the starting point of the adjusting entries. That's the one we want. So I'm going to say, Okay, and then next, now I got to see where I want to put it. So once I uncompressed this, this is where it's gonna go. You could keep it on the desktop, but I recommend creating a folder because it creates not only one file, but some other kind of files that go with it for some reason or another. So it's nice to have it in a folder so you don't have these other weird things floating around on your desktop. So I'm going to put it in here. You can rename it if you want to name it something different, it down here, of course. And then I'm going to save it. So we're going to save that item. If you're working along with the course and you're using any file that's a great, great guitars file. The password is G, G, G capital G, G, G 1234, capital G, G, G, 1234, capital G, G, G, as in good grade guitar's 1234. Okay. Now the restoration process can take some time, so give it a little bit of time here. Once it's restored, if I go back to the desktop just to see what happened, There's my backup file, nothing happened to it. There's my program, that's good. Now I've got the folder which has stuff in it. Now this is where we put the actual data file. If I go into that data file, then you can see I'm going to make the icons larger. There was nothing in this folder before. This is the actual like q o file, the actual file that we're using. But you can see it made all this other kind of stuff that I'm not sure how necessary it is if you deleted it all, I think the files still works, but that stuff just kinda hangs around if you put it on your desktop. So it's nice to have its own folder so that, that stuff doesn't just kinda literary your desktop. Alright, closing this back out, Let's go back onto QuickBooks. Now, even though we now have the 2021 version, they do update even the latest version from time to time. So even if you had just downloaded it, you probably want to make sure that you've got the latest version. So I'm going to go and also note that if this is the first time that you set up QuickBooks itself, you might have to use the registration number and whatnot that was given on the QuickBooks tab over here in order to register the license number and product numbers. So just remember that I'm going to close this back out. Then we'll go to the help dropdown. And we want to update desktop. So I want to update QuickBooks Desktop. So I make sure I have the latest version in place because again, I want to make it as likely as possible that this will go smoothly as possible. We will update it now and then I'm going to get the updates. If you have substantial updates, then this may result in you needing to restart the program itself or possibly the entire computer. If you don't have substantial updates, then we can just close this out and continue on. Next we go to the company dropped down and then we're gonna go to export your company file to the QuickBooks Online. So company dot drop-down, export your company file to QuickBooks Online. So then we have the option to move to an existing QuickBooks file or to setup a page file. But we want to try 30 day free trial for our practice problems. So I don't want that 30 day free trial. I want to check this one off. It's not quite as boldened over here. One of the problems with the conversion oftentimes will be the inventory, because inventory for the desktop is in weighted average method versus first-in-first-out for the version online. So I'm gonna go ahead and say yes here and then pick up the starting date. Would want to convert it. I'll just pick up today as the starting date when the change will take place. And then I'm going to say save it and continue, Save and Continue. That's one of the areas will, will basically be checking or you want to be careful of if there's some kind of difference with the inventory. And then we could say, Do you have a QuickBooks Online account? If you do, then you say yes, you still may be able to sign in with a 30-day trials considering this as a new company file or different company file. And if no, then you're going to select know over here it creates a company file. I'm going to go ahead and fit. Fit, yes. Sign me in. We then have the email and password and then I'm going to have the company name for my company name as the get great guitars transfer from desktop company file. And then we're gonna go down here and upload. Depending on the size of your file, upload process can't take some time, so give it a little bit of time. Just note also that this software for QuickBooks to do this upload has been interfering a little bit with my recording software. So if the audio is not quite as good as it has been, then that's kind of one of the issues. But in any case, here we go, we're gonna say good it got it. So got it. After a little bit of time. And again, that does take a little bit of time. They're going to email USA. We've emailed us, we've got an e-mail here saying, congratulations, your data is now available on QuickBooks Online, we think, and go ahead and complete your setup. So I'm going to click on the complete set up, which should be a link. Once that loves you into your account, you may have to finalize a couple more questions here, including, what's your role at your business? We're going to select owner for our rule for our practice purposes here, do you have an account or bookkeeper right now? I'm going to say no, we do it ourselves at this point. And then we're going to say, great, We'll be with you every step of the way. So I'm gonna say, Great, All set. And there's our data set up here. Then you're typically going to want to double-check your data that's going to be on the online to what you have on the desktop version because there could be some issues with the conversion, especially with things like the inventory item that we talked about. So welcome to QuickBooks Online. So I'm going to say, Okay, and you could take that. Let's go tour. I'm just going to close out of it myself. And then once again, you have this on the online version and you wanna kinda check it to what you have in the desktop version. You can then run reports on the left-hand side, the main two reports, those being the balance sheet and the income statement, which are typically going to be up top in the favorite reports. So we're going to say favorite reports. I'll open up the balance sheet type of report. And then let's run that from here will run from 101 to one to 1231 to one, and say run it. So that's what we have in our data. Thus far, we can go to the income statement. I'm going to duplicate the tab. Right-click. Duplicate the tab up top. We'll talk more about right-clicking and duplicating tabs as we go, but that's a nice feature to have. And then we go down to the reports on the left-hand side and then open up the income statement. The other way you can kinda check that this is with simply running a trial balance type of report in both softwares and checking it. They're running this from 0, 1, 0, 1, 2, one to 1231 to one and run that report. I'm going to close up the hamburger hold down Control. Scroll up just a bit and then it once again, you can run through these numbers, double-check them to what is on the desktop version. And if there's any differences in them, then you can kind of drill down and see what those differences are. Working in the practice problem here, we should be able to mainly push forward with it. Note that again, one of the problem areas that are going to be in the transfer could be with something like the inventory items, those being a separate method from the desktop to the online version. Desktop being weighted average, online version being the first-in, first-out method. But in any case, that's going to be the process.
4. 9.07 Bank Reconciliation Month One Overview: Quickbooks Online 2021, bank reconciliation month 1, overview. Let's get into it with Intuit QuickBooks Online 2021. Here we are in our gut great guitars practice file. We're going to be discussing the first bank reconciliation or recognizing the fact that the first bank reconciliation after having inter-data into the QuickBooks, online software can be more difficult, often is more difficult and has challenges that are unique to it being the first bank reconciliation. So we'll discuss some of those challenges. If you're having problems with the first bank reconciliation, do not give up on reconcile lean because after that first one, it should become much easier in the future. So discuss this and let's go ahead and open up our balance sheet. We're going to duplicate the tab up top. First, go into the tab up top right-click on that tab, duplicating that tab up top. Then we're going to go down to the reports on the left-hand side, we're going to be opening up our trial balance sheet, report balance sheet, report the favorite report balance sheet. Then we're gonna go back up top range, change it, we're going to be Indian then in the first month that we have inter, which in our case is going to be January 31st, 2021. It's possible, as we have done here, to enter data past that time period and then go back and do your reconciliations month by month. So we've actually enter two months worth of data, and now we're going to be reconciling on a monthly basis starting with January 2021. So we're going to be ending in 0131 to one. We're going to run that report. I'm going to hold down Control, scroll up just a bit to get to that one to 5%, close up the hamburger. And then here we have the checking account. So if I open up then the checking account, this is the data that we've been putting into place when to hold down Control scroll down just a little bit so we can see all the data. So there's our beginning balance. That's the point that we put in when we start our checking account. And then we had all the data for the month of January that we put into the system. Our goal is to compare this information to what is on the bank statement. And as we do so if we can reconcile exactly, then we have a double-check from a third party that's going to give us that reconciliation, which is a huge internal control, is something that we really want to do if you're putting your information into QuickBooks, That's one internal control because it forces you to do a double entry accounting system. But if you then reconcile on top of that, that's going to add a huge layer of internal control of verification that you're entering things correctly. You can see then at the Indian balance here we've got the ending balance at the 100 to two hundred, three hundred fifty, that does not match. If I jump over to my bank statement, Here's our mock bank statement which has the beginning balance, additions, subtractions, ending balance at that 89, 335. Those two things do not match even though this is as of the same date, as of the same point in time. Now that's going to be typically the case, even if there's no error involved because there will be those outstanding checks and deposits if we're using a full-service bookkeeping system. Realize, however, as we discussed in the prior presentation and just to recap really quickly, if I go back to the desktop version here, you don't need the desktop version to follow along. I'm just going over here for the flowchart that a full-service bookkeeping system, whether on a cash basis or accrual basis, means that we're going to be using these forms, invoices, received, payment, create sales receipts, and depositing independent from anything from the bank. And then we could verify the information from the bank would using bank feeds if we so choose to double-check that what we have entered matches what's in on the bank. So we have that independent third party verification. It is possible to actually create your financial statements from the bank statements, which gives you less verification. Because now you're not doing a double-check, you're just doing a single check because you're taking it actually from the bank after it has cleared, you're not going to know what the outstanding items all you don't know what the outstanding checks are, deposits are because you're not recording those in the system. You're waiting until they clear the bank and then just recording what clears the bank. In that case, you'll still want to do a bank reconciliation, but there will be no difference between the bank and the books because you created the books from the bank directly as opposed to using it as basically a double-check. But you still want to reconcile to make sure that your inter and everything correctly, meaning you haven't doubled input, anything from the bank or you haven't missed anything that should have been input from the bank. So that's going to be our objective. We get the full service system and we're double-checking to the bank at this point. So this is what we have in the bank statement. The bank statement typically will be coming at the end of the month. So we get the bank statement at the end of the month here. That's why we compare it to our books at that same point in time, you do need to compare as of a point in time. Although you have online banking and we can go anytime we want, just look at what's in the bank. We can't do a bank reconciliation as easily. We can't do it if we don't select a point in time to verify as of that point in time. Because as of this point in time, what I'm going to do, what we are going to do in this process is see exactly what the differences between the banks books and our books. Not so that we can correct it necessarily because there may be nothing to correct we're both correct in the information that we have. The information for the bank is just incomplete. They don't know about the outstanding checks are deposits. We just want to verify what that is because that gives us a double-check that everything else is correct. So that's going to be our objective. So if I go back then to the QuickBooks over here, and I scroll back up top, that's going to be our objective to reconcile these things, the tool then to do this, to match this out, if I go back to the first tab is going to be our bank reconciliation process. So we can find that by going to the accounting tab down below. And then you're usually in the chart of accounts, but then we jump over to the reconcile item. So we get the reconciling item. And then we're gonna go into usually the checking account which we already set up here. We so we'd have the checking account and I'm going to resume because we kinda started the setup last time, but I'll just review what we added in the setup. So I'm going to say resume. I'm going to close the hamburger. Now what usually happens in the setup if I go to the edit information, you've got the same information as the normal setup process. The beginning balance will be there by default. Notice I can't change the beginning balance because the beginning balances in the system from the prior bank reconciliation that happened. This is the first bank reconciliation. We don't have any prior bank reconciliation. Therefore, That's the first problem unique to the first bank reconciliation. Often this beginning balance will not match what's on your bank statement here. Because the bank statement has this beginning balance because I started putting money into the bank statement, you know, before I started entering the data into the QuickBooks. So I could try to go back in time and basically enter information into my books that would accumulate up to this 30000 and go back in history and figure that out. But I don't wanna do that. I just want to start my books as of January 2021. And as of that point in time, I had 30000. I need to use that 30000 and put that into into my books. And in our case, whatever we needed to put in our books, we put we put in our book. So I'm not going to try to go back and recreate this item because in our case, we're imagining it came from a prior bookkeeping system and I'm not going to go recreate the whole prior bookkeeping system to get to the beginning balance here. So what are, what are going to be our options then? Well, if I go back on over, we're going to say that we're going to basically enter this into the system as it, as a deposit and we'll see that as we go. But that's going to be the first kind of problem. So then I'm going to have the Indian balance, which is the 1893 35 that's coming from the bank statement. So I'm just going to pull that right from the bank statements. So at the ending point, I'm going to end at the 1893 35. Then next bank statement, next month. I will not have this problem. If I could fix this problem this time, I will not have that beginning balance problem next time because on the next bank statement in February, it will have the same layout, but it'll begin with the ending balance that is here. And once I have that correct in the system, then it'll be correct and I won't have a problem with it, so we just gotta fix that this time. This 893, 35 then is going here. Then we have these options to make entries. These are basically entries that we could put like you could think of them going into the check register. Common things that are actually on the bank statement that usually are not in our books. Meaning, if we have something on the bank statement that is not on our books, it's usually something that we have to include on our books. So the general rule that we have, in other words, is that if it's on our books in it's not on the bank statement. That might mean that it's an outstanding check or deposit. Because if it's on our books, we know that we clear we wrote a check, for example, and it hasn't cleared the bank. So if I wrote a check at the end of a month, then I know I wrote the check and it hasn't cleared the bank yet. Just they just haven't cleared it yet. So that would expect that to happen. However, if it's on the bank statement and it's not on our books, due to the way the timing difference will go, then either the bank made an error or there's something that I need to record on my books. And it's usually the fact that we need to record it on our books. So once again, if it's on our books and it's not on the bank statement, it may be outstanding check and deposit. Those are normal timing differences. That's what we expect to happen if it's on the banks books, on the bank statement and not on our books. Then then either there's something wrong that we need to include in our books or the bank made an error, which does happen from time to time, but it's quite rare to be happening. So, so that means that in the two things that are often on the bank statement are things like the bank charges. They just charged us money. I didn't know about it until I saw the bank statement and they said, Hey, we had a bank fee that we charge to you and like, all right. So now we're going to have to record that on our books. I'm not going to argue with them unless it's wrong. And then the other thing might be interest income. So they might give us some interest income, which once again, I didn't know about until I had the bank statement and then I can fix that on our side. So we could do that right here. But I don't really like doing that. I'd rather just do it in the register myself and then tick and tied off in the normal process of the bank reconciliation process. So I don't usually use these fuels. Then I'm going to say save it. And so this is going to be our normal kind of bank reconciliation process. And remember our goal is to compare what's on the banks to our books. So this big number right here, 89335. That represents then our 89335 here. That's our ending balance. That's where we want to get. And what we currently have cleared is nothing anything I check off down here will be cleared. So these are going to be the actual transactions. If I check off one of them, That's 65000, that's been cleared. And we're verifying by checking it off that it's on the bank statement. Now the difference is 24335 because we were subtracting these two out. So we want to get this difference down to 0. If I get that down to 0, that means we're basically have done the process of reconciling and then can create a report which is the bank reconciliation report. Now that beginning balance is 0 over here, and that's going to be one of our problems. We'll talk about that in a second. Then we have the payments. So these are anything that decreases the checking accounts. So like if I check off these guys, there's a payment item and then the deposits are going to be the anything that I check off, it's an increase. So there's the deposit item. So you can kinda see how those will be working out. Our key number, of course is going to be over here that we're looking into. Also note that if you want to leave at any point in time you can, you can save it for later, up top. You can say I want to save for later and then leave and then come back to the bank reconciliation as we will do in future presentations. We've got then the filtering options over here. If I hit down the filtering options, you can search for something. If you have a long bank reconciliation, you can't find a particular thing. You could use these search fields, you can search by, by category, which isn't used quite as often, but you can, you know, you can filter by these items. And then the search by the pay e, which again, if something's on the bank statement and it's not and you can't find it for whatever reason on the bank rec, then it might be useful to do that. This is a nice field over here that it's going to end at. Meaning we're going to stop looking at this. I'm not going to look at data in my reconciliation past the bank statement date, which is January 31st, 2021. Because if I entered it in my books in January, then it's going to clear either in January or sometime after January. But there's not a case where something cleared the bank in January, but we entered it in our books at some point after January. That can't happen because of the way that the things are working, right? When I entered into my system, it might hit the bank statement later than when we introduced in our system, but it can't be the case that we entered it after January. And it cleared on the January bank statement. The bank cannot know about something that we recorded before, we know about it. Therefore, this Indian date should be effective. Now, if we miss keyed something, we and we entered it in the wrong date, then that's when you might want to look for future transactions and see if you had a data input date error for the data input. So that's going to be, that's going to be that item. Then we can search by all down here, meaning we have both the payments and the deposits, or we can go to payments only. So now we just have the payments or just the deposits. That's very useful. We can see all of them in this way. You can also change the sorting, sorting by date over here, or we could sort by type. We could sort by the reference number. This is very helpful if you have check numbers. If you have all electronic transfer is not so helpful. Sort by account, not all that helpful. Usually the E or the memo or the amount over here, which can be useful if you sort for the amount. But normally you're going to be sorting by data because many bank statements will be sorted by date. So that's going to be often a useful way to go or the reference number. Because again, if you have check numbers in there, then that'll make it a lot easier for you to kind of find those check numbers. You may also sort by the amount because that could obviously be useful as well. But I think the default would be date. And then search for the reference number. And if you can't find something, then you would search by the amount. That would be the general process that I would be looking for. The idea of the bank reconciliation. It's very straightforward. We're going to say, Hey, look, if we're at the same starting point, I'm at the bank statement. If I have the same starting point, and then I check off everything that is on the bank statement that's gonna get us to the Indian Point. And I can find that same information on our books, then we have to be in balanced meaning. In other words, we have that starting point, then the additions, then the subtractions to get us to the Indian point. The starting point is what it is. And then we have the increases here that I can tick off line by line and the decreases here that we can take off line by line. If we have the same starting point of the cleared transactions, and then we tick off all the additions and all the subtractions. Then we have to end at the same ending point. It has to work. So verify that in your mind, it's gotta work. There's no way it cannot work if you check everything off. If I have the same starting point and I add the same numbers on one side to the other in the state bank statement and our books, it has to end at the same area. All right, So that's going to be the idea. And then the items that are not checked off, then we would assume they would be the items later in the month. So some of these items down here, I would expect them not to have cleared, they will not have checked off and therefore being unclear. If they are unclear and they were written, they happened on our books in January. Those are going to be the items in the bank reconciliation report that will be the reconciling items, outstanding items, in other words, outstanding checks, outstanding deposits. So that's going to be the objective or basically what we are looking at now. Now we have a problem though, because I don't have the same starting point. How am I possibly going to reconcile if the starting date, the 30000 isn't where we're starting over here. That's not where I'm starting on here. Well, you can kind of figure it out. Well, what we'll do in the first bank rec is I'm going to say I'm just going to recognize that I know I don't have the beginning balance, but if I just check off the beginning balance as something that has cleared, meaning, when I opened up the report, I put this 25000 in as the beginning balance. Why? Because that's what was on my prior bank statement and I had to put the 25000 in there because that's what was on the balance sheet. So we enter 25000 in when we started in order to be in balance, in order to put what was on their last time. So so if my beginning balance tied out, then I can just check that off here. And although it's not in the cleared balance, I would still just check it off as an item as the same item. In other words, if I looked at this and I said We're at the same starting point and then I have the increases and decreases will end up at the same ending point. But if I start at 0 and you start at 35000, and then I just add another deposit down here, which was 30000 that I'll check off. Then we'd still end up at the same Indian Point. So that's what we would do there. Now we still have a problem here though, because this was 30000. In my beginning, balance was only 25000. So we have an issue there, even there I had to put 25000. Why isn't it 30 thousand? That's because on our books last month, what was on our books was different than was on the bank statement. And last month, the month we pulled over our information into the current system. The reason is because there was outstanding checks and deposits, meaning there are going to be some checks here. In this case, we can see them, they're right here, that these two checks add up to that $5 thousand difference. Those two those two checks are going to clear this month and I'm not going to find them on our side. They're not going to be in here because we didn't write them in January. We actually wrote them in our prior accounting system. They were outstanding. And so that's really what the difference is going to be made up. So I'm going to check this one off. And then I'm going to I'm going to check everything else off. I'm going to say 5000 off still. There's going to be a problem. It's right there. I'm going to find that I can't I can't check those two off in our accounting system and that's what the difference is. So I'll check this 25 of this off as having cleared as our beginning balance. It'll be a deposit on our side, which will not be the deposit down here. It'll be like the beginning balance, which will reconcile us. Then we'll be off by the 5000, which I'm going to verify and show that those represent these two checks that I didn't enter in January. And therefore, I must have entered last month in February, they were outs we must enter the last month, last December and they were outstanding. And that's the difference. And then we'll figure out kind of what to do about it once we get to that point in time. So that's going to be some of the major problems with the first bank reconciliation. Also note that when we enter this into the system, on the deposit side of things, the dates should be fairly close, right? Because it doesn't take long to clear. If I go to the bank and deposit something, then it should clear the bank within a few days. That should be pretty quick. If I have on the federal side of things, things that are decreasing, if their checks, then that's going to be the longest kind of thing. That's where I expect the timing difference to be the longest, especially depending on who I give the check to. Because they have to then get the cheque deposit that check in their bank. Their bank has to talk to our bake before our bank will report it as having cleared. So the cheque date will always be later. So that's where the biggest discrepancy will typically be. And if we have electronic transfers, then again, that should be pretty quick, right? We should be if we paid someone electronically and we record it on our side, it's clear through the bank fairly quickly and that should be fairly quick. So the checks are going to be given us that biggest problem of the timing difference. The checks also give us another check for verification because we have the check number. But the date doesn't help us too much because it's not going to be too close to our date, possibly because it might take a long time to clear. Whereas on the deposit side, we're not, we don't have a check number or anything else. We gotta gotta go by just the amount that was deposited and then the date does help us because it should be pretty close. So the date helps us on this case, the deposit amount helps. Now if we put things into our books, however, deposit thin team them, grouping them in a different format as will be seen on the bank statement. In other words, if this 50000 consists of light 20 sales that we made, that we put in our system independently. And I'd have to go through our books and add them up on our side. In other words, if I went over here, looked at the deposits and instead of grouping them together like this, 25000 represented 10 different deposits from 10 different customers that I just took directly to the bank statement. Instead of going through and deposited funds and thinking about how to group them together in the same way as they appear on the bank statement. Then then I'm going to have an issue. I'm going to have to do a lot more work and the bank reconciliation process. So on the deposit side of things, That's why whenever you hit the bank was something deposit or check, you want to think about how is it going to show up on the bank statement and try to line up your groupings that you are depositing into the bank using an deposited funds, for example, as we discussed in prior presentations, to the way it's going to show on the bank statement. So deposits should be fairly easy, but they can be difficult if you have credit card deposits that the credit card company can kinda mess up how the grouping of the deposit will look and it looks different on the bank statement. So you've got to work with the credit card company. And if you get deposits of cash from a cash register or something like that and you're not using an deposited funds to group up your deposits, then you want to think about that system and how you can kind of sure that system up as well on the electronic transfers. Over here, you might have more detail. We don't have the check number there, but they might give us more detail that could give us an indication of who the vendor is and things like that. So if it's an electronic transfer, you might think there's less information because there's no check number, but the date should be more relevant in that case, the amount should be relevant, of course. And we might have actually more information for the electronic transfers because we'll have things like the vendor data. Maybe there'll be more of a digital data that comes through in the electronic transfers. So that's going to be the general process. So we're going to actually start ticking things off finally next time. So I'm going to hit, I'm going to say save for later this time. I'm going to save it for later. And then we'll continue on it next time. So stay tuned. It's going to be great.
5. 9.10 Bank Reconciliation Month #1 Deposits: Quickbooks Online 2021, bank reconciliation, month 1 or the first month of the bank reconciliation we're going to be focusing in on the deposit side of the process. Let's get into it within two. It's QuickBooks Online 2020 one. Here we are in our get great guitars at practice file continuing on with our bank reconciliation. So we're first going to be opening up our balance sheet report and duplicating the tab up top. Do so. So I'm gonna go up top right-click on the tab, duplicate it. Then we're gonna go down to the reports on the left-hand side, selecting our favorite report that being the balance sheet reports. So we're going to be opening up the balance sheet report. Range change on the date range up top Indian at the 0, 1, 3, 1, 2 1, 0, 1, 3, 1, 2, 1. Running that report clothes and up the old hamburger. We're focusing in here on the checking account, comparing what is on our books to what is on the bank statement we're imagining that we have then the bank statement as of the end of the month. It's going to look like this. So this is our mock bank statement where we had the beginning balance, the additions, subtractions. We then have our ending balance. That ending balance, of course not timed out to what we have on our books. That's going to be the process that we're going to go through now for reconciling. Two things we want to pick up when reconciling is one, are there any corrections that we need to be making and to what are the open items, outstanding checks and deposits that we can then use to for our bank reconciliation to tie out what's on our books to what's on the bank. So let's go back on over to our QuickBooks then. I'm going to go back to the first tab where we started off our reconciliation process. I'm going to scroll back down to 100%. Go to the accounting tab on the left-hand side, reconciliation up top, uh, last time we started the process, this time then we're going to resume resuming the process or the bank reconciliation. We left we left last time in the middle of this, got some coffee and whatnot, what you can do and we're going to come back and then resume. I'm going to close up the hamburger up top. We're going to be focusing in on the deposit side of things. So remember our status here, this item right here, that's what's on the bank statement. So our Indian balance on the bank statement is going to be this and that. And then we want to tie out that cleared items. That cleared items are going to be these ones, which will be all the things that we check off, all the things we check off and the beginning balance, the beginning balance being currently 0. So everything we check off when it matches that 89335, then this difference column will be down to 0. And that's when we've done the process of reconciling and then can make the bank reconciliation from it. So that's gonna be our process. We're focusing in on the deposits. And I think this is really good tool within the QuickBooks Online, meaning we could just select the deposit items, the items down below, then we'll just be reflecting those deposit items. So that's what we'll do here and select the deposits. So there we have it that deposits are usually going to be a more straightforward kind of process to be dealing with because the deposits are usually it will depends on the type of industry that we have, that what the deposits may be less and we might have the dollar amounts to match up with. And then of course, the dates usually will be closer to the point in time that we actually enter the deposit in our system to the point that they clear. Now when do deposit side of things become complicated? They become complicated when we have a whole lot of little deposits. And that might happen if we have, if we're selling types of things wherever a large volume of sales that are happening that are going directly into the bank statement. They could be complicated if we have basically check, if we have credit cards that are depositing and grouping things into our system, into the bank statement in a different way that we're grouping things in our books. So if that is the case, then you're going to have to be working with your credit card provider company that's helping you there and your bank to line up your deposits there. And they might be difficult if you're collecting sales items. I'm going to the flowchart on the desktop version just to see this process. For example, if we have a lot of sales on a cash register will have a point of sale type of process. We're having a lot of cash sales or whatnot, and then we're just entering those directly into the checking account at this point, instead of grouping them in and deposited funds and then depositing them into the BankAccount in the same grouping that we expect them to see on the bank statement, which would be the grouping that would be aligning to us go into the bank and actually making the deposit. Because of course that's going to be the format that will be reflected on our books. So if you have that type of situation where you, where your deposits in the books are different than is on the bank statement, you can't deal with that, of course then when you do the reconciliation, we're just gonna kinda go through all the deposits and group them together so that they tie out to the item that's on the bank statement. But it's tedious to do that. And it's going to be less likely that you will be able to automate that process if you do do bank feeds and what not. If you can get things to line up. Then if you do link up the bank or something like that, then it could usually pick out the deposit and match out that deposit, helping us to do the reconciliation process automatically or as we go. So what we're gonna do is we're gonna go back here and we're going to say, okay, this 30000, that's kinda like our first deposit right there. Because that's that beginning balance type of problem. It's the first bank reconciliation. We don't have anything on our books in the beginning balance because it's the first bank rec. So we're gonna kinda do a workaround on that. Meaning, instead of having the beginning balance line up when we entered the bank reconciliation, for example, instead of having the beginning balance here, if I go to the info tab, there's nothing in the beginning balance there were instead just simply going to check it off just as if it cleared down here just to work through that first bank reconciliation. The first line item we're looking for is that 30000 to kinda checkoff. Now, if, if we have the 30000 when we entered our beginning balances, we could just do that. But the problem is, I'm going to check it off right there. It was 25000. So we noted in the prior presentation that we're going to have a problem with that beginning balance. One is the fact that it's not there to, is the fact that the beginning balance that we put in place, even when checking it all still doesn't line out because we had outstanding checks last time and we'll be able to see that here. I can see it right here. I can see that these two checks are probably the one. That's that $5 thousand difference. So that'll kinda washout. We'll see how that plays out as we go through the finished a bank reconciliation process. And then we'll discuss how to deal with that. Once we, once we see what it is, we'll see what the differences and what's the proper way to deal with it. What's the easy way to to get with it, but not quite as proper way to deal with it and so on. So then, which is going to be checking off everything on the bank statement to our books. Now remember, the process you're looking at is going from the bank statement to the books. This seems like a minor detail, but it's important because everything on the bank statement we expect to see on our books, if it's on the bank statement, it should be on the books because we made the the books on our side and then the thing cleared the bank, right? So that means that if it's on our books and it's not on the bank statement, it may then be a timing issue, but if it's cleared the bank, then it should be in our books unless there's an error. That's the process we want to go to. I want to go from the bank, check it from the bank to our books. If it's on the bank statement and not on our books, we're probably going to have to add it and list a bank is wrong, which is unlikely, unusual could happen. Unlikely unusual however, and then whatever's left that's still on our books that we didn't clear the bank, then that's going to be our outstanding items if we have any. And we expect that to be the case because because we did our books first and there's a timing difference, the bank doesn't know about those. That's our reconciliation. All right. Let's just do this. I'm looking for that 50000. Going back over, there's the 50 thousand. No problem. So I'm gonna go back on over here and I'm not going to highlight this. And I'm just going to check it off now if you have this printed out on paper, then of course I would just take the trustee highlighter and just highlighted as you go. If you have a very basic bank reconciliation, you could do this quite quickly if you have a whole lot of transactions and just become somewhat tedious and you would like to check them off as you go so that you don't have to start all over again. It's worthwhile to kind of do this one time. You do want to reconcile exactly. If you do not reconcile exactly, Then the ability for the reconciliation to give you that internal control that added assurance goes down greatly because if there's any problem or any difference that could be caused by multiple deposits and multiple checks. If you're completely right on basically to the penny, then then your your level of assurance is way higher. So we're then gonna go back out and it should be easy to do because again, we're just taking anti and everything off. Does it match exactly? Yeah, it matches exactly. So we're just going to be tying everything out. So the next one we're looking for is going to be that 65000. So there's the 65000. Boom. That date is at 1 one over here. That should be once again close to the date over here. It should be within like three days you would think because it doesn't take long for a deposit to clear the bank. And then we've got the 56. So we're looking for the 56. There's the 56, we got that. And I'm going to highlight that in yellow phi it. So we're going to yellow phi that one halophiles highlighted. And then we've got the 20000 500 and the 20000 500 there. So there we have it now we've checked off all the deposits on our side, on the bake that were on the bank statement to the books, all the deposits on the bank statement to the books we have checked off. I'm going to unify this properly. So there we have it. And if I pull out the trusty calculator here, we've got the trusty calculator. I'm going to say that the deposits that we have are the additions are going to be that 141. That's going to be the sum of these, the 50000 close to 65 thousand plus 56 plus 25, plus I'm going to add the beginning balance, so that ties out to this 1411 plus the beginning balance, 30000, which I'm going to treat kinda like a deposit on this first bank reconciliation since we had nothing in the beginning balance. So then if I go back on over here, we've got our deposits at the 16, 16, 1, 16 6, 1. If I subtract this out, 16, 6, 1 000, we've got the $5 thousand difference, which of course is the difference between the 30000 beginning balance and the 25000. And we record it here so we see what that is. And I could see where we're probably going to reconcile outer play out. And it's going to be these two items are going to be items that were outstanding last time that cleared this cleared in this period on the bank statement. But they're not something that we entered in January because we actually wrote the checks sometime in December, so we will deal with that in a future presentation when we get there, but we can kind of see what is happening with it at this time. Then we have this deposit down here, which is on our books, but it's not on the bank statement. So that typically we're going to say, okay, well, that's kind of normal because I would think that we might have put it in our books and it has not yet cleared the bank statement. So we would expect that to be the case, however, because it's a deposit, you would think it would clear within a couple days. So the fact that it's on there at 123 and it has not cleared as of 12 31 would cause concern. But how would we check it? We can obviously just go onto the bank statement or onto our online banking and see if that cleared in February. If it cleared in February, then we're good. It's just a timing difference. It's just a timing difference. We might want to ask her bank white took so long in this case, but if it were closer to the end of the month and it cleared in February, that's kind of what we would expect to happen. So this being on our books isn't wrong. Meaning this being included in this number. If I go back to the balance sheet on our books, it's adding or increasing our checking account on our books. It's not on the bank statement here. That doesn't mean our books are wrong. That just means we have more information that the bank does not yet have due to the timing difference in the bank statement doesn't mean that the bank is wrong either. They didn't make an error. They just don't have the information yet. When will they have the information? In February. And we can actually check that at the point in time we do the bank reconciliation. Because when we do the bank reconciliation, It's going to be at some point in February when we do the bank reconciliation for January. So I can go ahead and look that up. I can imagine I look that up. And I said, Yeah, That cleared February. I'm okay with that sum that's fine. That it's going to be outstanding. It's going to be a reconciling item when we do our bank reconciliation. That's going to be one of the items that it's going to account for the difference between what is on the books, the 1033250 and what is on the bank statement as of January 31st, the 89335. So that's where we stand at this point. I'm going to go back on over and then once again, I'm going to save, save it for later, save it for later. And then we're gonna go do some other stuff again. And then we'll come back and we'll continue with our expenses side of things.
6. 9.12 Bank Reconciliation Month #1 Checks & Cash Decreases: Quickbooks Online 2021, bank reconciliation month 1, or in other words, the first bank reconciliation within our QuickBooks system now focusing in on it, checks and other decreases to the checking account. Let's get into it within two. Quickbooks Online 2021. Here we are in our gig, rick guitars practice problem. We're going to be continuing on with our bank reconciliation first step, opening up our balance sheet, we're going to duplicate the tab. To do so, going up top, we're going to be right-clicking on the tab up top, duplicating that tab. And then we're gonna go down to the reports on the left-hand side. So here we are there. And then we're going to be opening up the good old balance sheet, our favorite report, the balance sheet report, range changing that up top Indian at the a 130 one-to-one, then running that report, closing up the hamburger, scrolling up with the control down a little bit just so we can take a look at the checking account we're reconciling. This is on our books for the checking account as of December 31st, 2021. Of course, we are comparing that to what is on the bank statement, which this is our mock bank statement. This is our ending balance at this point in time. We then are just ticking and tying everything off for our bank reconciliation process. We have done so thus far, looking at the deposit side of things now we're going to be continuing on with the checks and withdrawals types of things or decreases to the checking account. This is typically going to be the time where it's going to be a little bit longer of a process to go through these items. Because usually there's more kind of checks that we write or decreases to the checking account. Then on the deposit side, oftentimes, Let's go ahead and open up our bank reconciliation process over here. So we're gonna go back on over, go to the first tab, and then I'm going to hold Control, scroll down just a bit, getting back to that 100%. So it doesn't do anything funny on us. And then we're gonna go down to the accounting tab down below. We're gonna go to reconcile up above. And we've been working rather leisure really in our bank. Reconciliation had started it before. Now we're going to be resuming the process. Resuming the process, closing up the hamburger up top. So we have a little bit more space to be working in on. I'm going to try to scroll and just a little bit I'm at a 125% holding down Control, scrolling up to do so. Going to close this stuff out because it's in my way and I don't need it. And then I'm gonna go up top. We've been entering the bank the deposits last time. So this is what we have thus far. We did so by going down here and go in and focusing in on the deposits. Now we're going to be focusing in on the payments. So I'll go to the payment side of things. Once again, our process is I'm going to hold control and scroll down just a bit. Our process is to be timed from the bank statement over to the book. So this is going to be what we have in our book side of things. This of course, the bank statement, what we have on the bank statement side of things. Remember our objective here is to be going from the bank statements to the books. Anything that's on the bank statement, we would expect them to have B on our books. If it's not, we probably have to fix it. If it's on the bank statement, not on our books, then we're probably going to have to add something to our books unless the bank is wrong, which can happen. But it's not usually what happens if, on the other hand, it's on our books and not on the bank statement, then it's quite likely that we have an outstanding item, meaning we know about it because we wrote it or we enter the transaction. Bank does not know about it because it now has not yet cleared the bank. As of that point in time. Those then will be our reconciling items. Also note that when we're talking about the decreases, if we actually physically write checks, which used to be that we wrote a lot more checks going on. Then we'd have the check number to kinda help us out. And that could line up as well as the amount that would help us to line up. The date would not be as useful because it can take a long time for a physical check that you write, enter into the system which we recorded when we write the check, to then clear the bank, which would then take the check, go into somebody else, the other person deposit it in their bank and then talking to our bank, it would take a long time for that to happen. So the bank, the date then not as useful check number could be quite useful to help us to double-check. And of course the amount then would be useful if we have electronic transfers then meaning we make electronic payments, then you're not gonna have the check number, but the amount will still be useful. And in those cases the date will be much more useful as well. So many times in these days the electronic transfers are going to be more common and the date will be more relevant in those cases when you're trying to do your bank reconciliation process. And you might have information such as like the description or bank information that comes in to the as you go through those electronic processes which could help you to identify a vendor and things like that, which can help you to kind of tie out the information and give you a little bit more information to do so as well. So let's go ahead and just tick and tie this stuff off. So same process, we're going to go back on over and say, all right, let's go from the bank. We're going to go here That 2006 and 2004. I'm going to start off looking for those. I'm going to say, Hey, I don't I don't see those. I don't see those two items here. They should be there. Why aren't they there? Because these probably were outstanding items last time on the December item, meaning we wrote them in December last month, but they didn't clear until this month. But they're not in our books at all as cleared or not cleared because we started entering the data as of this month, the beginning of this month. So they were. Outstanding as of our prior accounting system. So these two items, we're going to identify those as the problem. That's the difference. That's why this was 35000 on the beginning balance. In our beginning balance that we've entered, it was only 25. That's our $5 thousand difference. So I'm going to say I will, I see what that is, but I'm not going to deal with that now. We'll deal with that. That's our beginning balance problems we'll talk about next time, but we see where that's coming from. Then I'm gonna go to this 12 thousand. I'm going to do what I can't right now. I know what I could do with that 12 thousand. So there's the 12000 going to check that one off. And then I'm going to highlight that we're going to yellow, yellow five, that one there's the 16000. They're going back on over others to 16 thousand here. Looks good. That's yellow five out1 going to go ahead and yellow phi, that one. There's 7 thousand here. And we have a check number that we could check off there. That's cheque number 1, 000 three. And the check number here is 1, 0, 0, 3. So we've got that added kind of check. Notice that the dates may not line up. This might not be a perfect problem for the dates, but notice the dates may not be the most useful thing. Once again, with the checks with electronic payments, they may be. Then we got the 20000. The 20000 should be over here. Notice this cleared on 114 on the Bank in over here. I'm sorry. It went into our books on the 114 date. It cleared the bank on 120. Always going to be the case. The bank will always be later. These dates on the bank statement don't match when we actually wrote the check. Those are when the checks clear what's on our books. If we did our books in real time, it didn't depend on the bank to do them when we wrote the check. In other words, we put them in our books, not when they cleared. Then our books. The date will be earlier than when they cleared the bank. So 20000 we're going to yellow phi that one. And then we got the 598059 800, checking that off right there. Looks good. And yellow phi yellow phi 620 for check number 1, 0, 0, 6. There's the 624 check Number 1, 0, 0, 6, looks good. Yellow five, yellow phi, indicating that that one has been completed. And in the 15000 for check number 1, 0, 0, 7. So 15 thousand check Number 1, 0, 0, 7, and then yellow Phi. So that looks good. Now these two down below, we may not have, because this one we're saying it's a cash withdrawal which we should have put in our books. But if we go over here, we're going to say I don't see the withdrawal happening. We're going to assume that like the owner just took money out. If it's a sole proprietorship, cash was taken out of checking account. And then this one thank charges. That one is almost never on our books because we didn't know about the bank charges until we got the bank statement and then they told us that they took some of our money out of our checking account to pay for their services. So we're like, okay, unless we're going to argue with those items, we're going to have to add them to our books. So how do we fix these two items? Well, they're not errors on the bank statement. And if they're on the bank statement and they're not on our books and the bank didn't make an error, which they usually don't. Then we're going to have to add them on our books. So I'm going to go in and add these then on our books here. So I'm going to go back on over. Now I could do this on a separate tab or maybe I just want to leave, I'd rather save this and leave this. And then I'll enter this in the check register. So I'm gonna say Save and save for later. And then let's open up our hamburger. And then I'm just going to write into the check register. I'm just gonna go down and say, All right, I've got to do some reconciling things here. Let's go to the accounting tab, which were already in chart of accounts up top. Let's open up the register for the checking account. Close up the hamburger so we have some more room to be dealing with this stuff. Hit the drop-down, we're going to need some decreases to the checking account for these two items to withdraw. And then the other the other item there, a bank service charge. So I'm gonna make them expense forms because there's not a check number of related to them. I'll put them in as of the end of the month, which is 131. And we'll start off with the miscellaneous item. Now, the miscellaneous item is going to be a problem if you're a bookkeeper, it's kind of an issue. If you're if you're if it's your company, then you kind of have an idea possibly of what that was for. If you're a bookkeeper and the person you're doing books for just keeps pulling money out. Then you're going to want to have a system for it. You're going to basically say, okay, what should happen is when you take money out of the, out of the business, then you should hopefully be spending that money on personal use. And I can then determine that at every time you take money out, it's a draw. I would like to be able to say it's a draw because when it clears the bank statement, I don't have any other information. So if it's a if it's an expense that you that you are spending money on for the business and it's something that you want to deduct for your taxes and whatnot. You want an audit trail to be happening there, which means you want to be taking that spending that money and with a check or with a, with an electronic transfer, some kind with a credit card so we can see who the vendor is, who you paid. Obviously, if you take cash out of the company and then pay for something that's business-related. We can't see it as easily. We don't have as good an audit trail. So you could still deduct it, but then you would need receipts and what not to really verify. You'd need more information typically to verify cash payments for business expenses. We would like to say, Hey, look, I mean, if you want to deduct this thing, if it's going to be an expense, something that you can deduct on your taxes most likely, then don't pay it with cash because you don't have an audit trail of it as easily. We have to do more work on that. Pay for it with a cheque, pay for it with an electronic transfer, pay for it with a credit card anytime you draw money out. We would like to assume that that was because you've used it for personal use. And therefore, I can categorize the draw as basically a draw rather than an expense. But sometimes people draw money out and they spend it on on the business too. And if that happens, then we got to determine what expense that should go to. Well, what accounts you to be go into because I can't tell from the bank statement. So we're gonna have to ask and determine what expenses should then go to. So let's this time we're going to be allocating it to an expense account. And then next time we'll treat it as a draw. So let's take a look at what that will look like. I'm going to go back on over. We're going to say that we asked about that 150 that was drawn out for cash. Was it used for business or not? If it was used for business, then I'm going to say that the business expense 150 payment. And then we're going to ask well, what was it four and if it was just miscellaneous, we used it for miscellaneous business expense, then we're going to put it to Miscellaneous for the side, which is not very descriptive. We'd like to have something better than that. The miscellaneous, it's not very descriptive account, but there it is. We're going to say it's a business expense that will then fall on the income statement. So if I save and close that, there we have that item. If I go back up top, right-click on the tab up top, duplicate that tab and just take a look. Of course, what's going to happen on the income statement, the profit and Loss report. Go on down to the reports on the left hand side. Opening up the a, P, and L, the income statement range change up top Indian at a 130 one-to-one, running that report, closing up the burger, scrolling up just a bit. And then we see that down here and miscellaneous now we've got that 150. So it's on the income statement, meaning it's decreasing the net income, which for taxes would be like a deduction. So if I go into the balance sheet, note that if we were to classify it as a draw, meaning it was taken out for personal use and not business use. Then we want to make sure that we put it in an equity account down here, something in the equity type of account so that it doesn't hit the income statement because it's something that was taken out of the business for personal use and should not even be a deduction or an expense on the income statement. So we'll see that next time with our second month bake reconciliation, where we will then treat it as a draw, which would be the standard way we would like to treat it. And then we have the bank service charge. This is kinda sticks. So we're gonna say this is going to be a payment of 1515. We could put the bank as the payee, but I'm just going to put the amount here and then the service charge. You could put this somewhere somewhere in like Miscellaneous. It should be a fairly small amount, but I like to break it out. And QuickBooks did give us an account called bank charges, so it's nice to have that broken out, broken out. I like to know how much the bank is charging me even though it's usually hopefully fairly small. So I'm gonna go ahead and save that. So now we've got those two items that have been posted. Let's go back to our bank rec then and continue on with our reconciliations. So I'm gonna go down to the accounting down below, go to the reconcile tab, and then I'm going to close the burger. And now we can resume, we're going to resume the reconciliation, the reckoning of the cilia. And then I'm going to I'm going to look at the payments now, payment side of things, scrolling down. And we then see we got these two that I can check off. There's the 15, there's the 150. And those two have been checked off because we found them. And then let's yellow phi over here. So now we found everything except for these two items. And we had that issue with the 30000 beginning balance only be in 25000 on our side. Now if I go back on over and it's like, Hey, look, I'm in balanced right now. I'm in balance and we are, at this point, we're in, we're in balanced, but we still got kind of an issue. It's like I don't really get it though because I put in this beginning balance and we checked off to account for that beginning balance. I'm going to go back to all transactions. The 25000 for the deposit, right. And that didn't tie out to the 30000. And then I still have these items on my a bank statement that I didn't check off at all. So those those two things that don't seem right kind of cancel each other out. And we reconciled so we could kind of stop there and go forward. But it doesn't seem quite right. You know, I'd kinda like to be able to check these two things off to recognize the fact that I wrote them last month and they cleared this month and then deal with this issue where I have 30000 and the beginning balance here. And on our books we had the 25000 that we started with. So it's not really the best way to start off by just going forward from here, you can kinda note that down. You can write it down and go forward from that point, but we'll talk more about how to deal with it next and the next presentation. So we're not going to finish it up this time. We're going to deal with that beginning balance issue in, in the next presentation. Also note that now we have these items that are outstanding down below. So if I look at the payment side of things, we have all these items, this one and these all these decreases that we wrote we wrote these in January and we didn't they're not reconciled. Does that mean the wrong are we wrong in that case? Not necessarily because they're on our books, but they're not on the bank statements. That means that there could be a timing issue and most likely or a timing issue, right? That means that we wrote them, we know about them. We know that there's a decrease in the checking account with the bank does not yet know because it now has not yet cleared the bank. If we have a question about any of these items, then we can check it because when we do the bank reconciliation for the month end of January, for example, it will actually be sometime in February. We can go online to the banking system and see if those things have cleared in February. If they have, then we're okay. We're saying okay, they they cleared the bank. There's nothing wrong here. It's just a timing difference. And these timing differences then will show up in the bank reconciliation report will be the difference between the bank statement if I go to the balance sheet and what's on our books are books here, bank statement here. The difference between those two numbers will be those timing difference. So it's outstanding items and if I can tie those out to the penny which I have here, except that we have that kinda funny issue. I have tied it out to the penny. That means that every other number looks correct, has been doubled, verified is something that we did on our side of the books and has been cleared on the bank side of the books. Therefore, we have verified and double-checked everything, not just look for those outstanding items by determining what the outstanding items or we put a double verification on all cash items in by double verifying cash, the lifeblood of the company. We've have a double-check or an internal control on all of those cycles within the accounting cycle. So we'll continue on next time with this kind of beginning balance issue. And we'll deal with that for now. We're gonna go ahead and leave this. So I'm not going to finish right now, I'm just going to save it for later. We're not quite done. Saving it for later. More coffee will be back.
7. 9.13 Bank Reconciliation Opening Balance Problem: Quickbooks Online 2020 one, bank reconciliation, opening balance problem. Let's get into it within two. It's QuickBooks Online, 2021. Here we are in our get great guitars that practice problem. We're going to continue with our bank reconciliation problem. To do so, let's open up our balance sheet by first right-click on the tab up top, duplicating that tab. Then we're going to go down to the reports on the left-hand side. Opening up then the balance sheets report, our favorite report, that good old balance sheet report. We're going to arrange, change it up top Indian Act and we're going to say the end of January, a 130, one-to-one. 130, one-to-one. Run that report. Hold down Control scroll up just a bit. We're looking into that 100,058 in the checking account, comparing that then to what is on our bank statements and we're comparing that to our bank statement with the bank reconciliation, we have gone through all the items thus far, deposits and checks, and we've checked everything off except for these two items here. Now this is our first bank reconciliation. So we have this kind of beginning balance problem, which has twofold to it, two parts to it. One is that we had this 30000 that's going to be on the bank statement, which is not on our books. And that's because when we introduced in our books, we just introduced as a transaction in our books and we had not done a bank reconciliation in the past. So we had a 0 amount for our beginning balance, as we will see shortly. And then to the amount that we entered into our books to start with wasn't 30000 but 25000. So even if I have the beginning balance on there correctly, it would be a different number. So those are kind of the issues that we're going to be dealing with. To see that more clearly, let's go back on over to our QuickBooks Online. Let's go back into our bank rec, which we had started in the past. I'm going to go back to the first tab, gonna go down to the accounting. Down below. We're looking for the reconciling tab or on the second tab for the reconciling we had started the reconciliation process. We're going to resume it. I'll just recap where we are at this point. Closing up the hamburger up top, we enter the information up top. So if I was to edit the information up top, and this is our problem. This is this beginning balance problem that only happens with the first bank reconciliation that you're going to be doing within QuickBooks and we'll never basically be there after that point in time. That bank reconciliation process should be much easier at that point, or after this point or after the first one. So we see here that that has 0 for us and I can't do anything about it. I can't put another number in there because 0 because it's based on what happened at the end of the last bank reconciliation. That's how the thing works. But we didn't have a last bank reconciliation because this is the first one. So that is 0. So when we look at our bank statement and we reconcile this first item, it's 30000 here and we have 0. Well, how is that possibly going to work? So we'll start to think about that. And then we have this ending balance, which is the 8933589335, is what our ending balances. So that one is good. So now we have a 0 there. The ending balance is correct. If I, if I close this back out, then then we went through this whole thing and checked everything off. That is on the bank statement on our books, meaning, we went through all the items here and said, this is the process If the beginning balance was correct, which is not here, and then we had all the additions and subtractions, then the Indian balance has to work. Meaning if the Indian balanced tied out to what's on our books, and then we checked off everything that's on the bank statement to our books, the cleared items the items that had cleared the bank statement, then we would have to arrive at the ending balance. Will we did that but we didn't have the beginning balance, so that's the problem. And then we checked everything off except for these two items. These two items were not there. They're on the bank statement. They're not in our books. Now we've done everything we can't except now we've got this 0 balance up top, and then we have these two items down below. So what do we do with this? Now, we happen to be in balance at this point in time. Not really happened to you, but the reason we're imbalanced at this point in time is because we checked off this 25000. That was what we put in the books as the beginning balance, meaning it wasn't in there from the prior bank reconciliation. But when we started our books on January of 2021, we enter this as of the first day of the last period, the 25000. This was our starting point that we started with before we entered any data into, into the account. Why did we enter 25000 here instead of the 30000 which is up top? Because when we pulled over our numbers, say, from our prior accounting system, and we wanted to make something in balance here. We had in our prior accounting system, 25000 in the prior accounting system as of the point in time that we started our data, which was 1231 to 0, which would then roll over to the first day that we're working in January 1st, 2021. So it was 25000 as of that point in time, as of January as of December 31st, 2020 on our books. But when I look at the bank statement. It was 30000 because on January 1st, which would be the same as December 31st, right? It's the same one day over. We've got the 30000. Why was it 25000 on our books when it was 30000 here? Because there were outstanding items. When in our books before meaning when I look at this set of books, I have to enter the 25000 in so that when we enter our beginning balances, we reconcile that debits equal the credits. But that 25000 also includes the fact that that's our records, which includes items that are outstanding, meaning checks or an ore deposits in this case, checks that we wrote in December that didn't clear until the following month, until January. And we can see that over here. So if I if I go back on over, that's what the problem is so that you can see how this plays out. We're going to say, all right, we had the 2008, we had the 30000 up top and this was the cleared balance and we only have 25000. Why was that the case? Because these two items we couldn't check off because we actually wrote them in December. We wrote them last month and now they're clearing this month. We didn't enter them in, in January. They're not in our books at all because we started our books in this accounting system in this time period. So notice that these two cancel each other out. The 30000 minus the 5000 is going to mean that we're, we're okay. As long as we note that going forward, then we're okay here. We can, we can, we can kind of move forward. We can say, all right, well, I know that, I know that that 25000 is basically the beginning balance. And those two checks, which I can't see here, but I see on the bank statement is the difference of that 5000. That's why we're in balance up here. And as long as I note that I might be able to just work from here, push forward and move on with it. But you might want to kinda tie this down a little bit more clearly than that here because I would like to have this first bank rec correct. I would like to check these two items off on it and I'd like to at least see that that beginning balance that I checked off was 30000. So it kinda ties in here. So the first bank reconciliation makes sense just on its face. So I might then make an adjustment. You don't need to. You could kinda reconcile and just note what happened there. But we could then we could then say, Okay, what I'd like to do is make that 30000 and then put those two checks on the books. That would then be the difference between the 25000, which would put us back in balance. So to do that, Let's go up top and i'm, I'm going to just show this real quick. I'll say let's leave here. I'm going to save for later. Once again, save for later. I'm going to open up a new tab. I'm going to right-click on this tab again, duplicate this tab. I want to take a look at the trial balance as of the point in time that we put this information on the books, when we put the beginning balance information on the books. So if I scroll back on down, I'm going to say that we want to go to their reports. I want to open up the trustee trial balance to good old TB, so I'm going to type in trial balance to do so. And then we'll range range change up top. I'm going to put just the date that we enter our beginning balances in as up. So we entered all of our beginning balances as of 1231 to 0, the last day of last year. So 1231 to 0. And I'm going to say run that report. So now we've got our trial balance point and close the hamburger, scroll up a bit. This is basically our trial balance that we entered and we had to be imbalanced, meaning this ties out to kind of our beginning balance. This was our beginning balance, trial balance that we entered into the system that so that we tied out, we had to put the 25000 in the checking account here. So if I go back on over, we've got the 25000 and there we have it. Note that the bottom of this item here in the equity section is now split out because we have some income statement accounts. And these income statement accounts are going to roll into basically the equity section. So they're going to be part of basically the owner's equity account when it when it rolls into the equity accounts. So in other words, if you look at the bottom of this item, in just the equity section, we've got the 20,500 minus the 16000 plus the 73396, which is basically combining these three accounts. That's the 7789. So if I go back on over here, we've got the 77896. So that's why there's this thing ties out here. And so now our question is what I'd like to do is this beginning balance for the bank rec, should be 30000 because and then we should have those outstanding checks. So I'd like to add that detail, but keep this checking account at the 25000 to do so. And down here, I'd like to keep the total equity at if I sum these up to 77 1896. And I also want to make sure that I don't include anything like an opening balance which we adjusted down to 0. So to do that, let's go back on over to the first tab and let's take a look at the register. I'm going to hit the hamburger. We're going to then go down to the accounting tab. And I'm going to hold control and scroll down a bit. I'm going to go then to the chart of accounts. Chart of accounts, we're going to look at the register. For the bank account. So I'm going to view the register for the bank account. Opening that up, I'm going to close up the hamburger up top. And once again, if we scroll down, we can see that there's that 25000 that we entered. So that 25000 and kinda wanna break out into some detail. I can see the other side of it went to that opening balance equity, which then we zeroed out. So I don't want to do anything that's going to affect opening balance, equity. What I'd like to do is add these two checks here. So basically I want to add these two checks as of the prior year so that there'll be in there as of the prior year and then roll into basically the retained earnings account. So that's what we're going to want to inputs. I want to add those two checks and then basically increase this to 30 thousand. The other side, I don't want to be put into two opening balanced, but rather just the equity account. So I'm going to have to interlock three transactions that will basically knit themselves out back to 0, but give us that detail of the checks that we can then see clearing. So let's go up top. I'm going to, so I'm going to add our two checks here. So I'm just going to add these two checks into our system because once again, they're on the bank statement, therefore, they should be on our books, but I'm going to put them in the prior period to the point that we're actually starting. So so they won't affect like our temporary accounts in the current period. So let's see what that would look like. I'm going to hit the drop-down and we're going to say, let's make it an expense type form. Note that I want to make sure to put this in as of the prior periods so I could take a look at my prior salts when see when we wrote the check. Notice it cleared in January. Of course cleared in January, but we don't want to put it in January because this is when it clear or not when we wrote it, we rewrote it sometime prior to January in the prior system. So I'm going to put this in as of 12, 31 to 0. And we'll enter that check and we're gonna say that this went to EPA phone, let's say and we're just saying it went to EPA phone here. That's what we wrote it two. And then we're going to say that was for the amount of what was it? 2600. So 26 000. Now, epithelium may have been who we bought our inventory from. This could be who we bought inventory from, but I can't bring this to an inventory account because when we entered our beginning balances up top for these items, I already entered the inventory. It so whatever inventory we have is already kind of included here. So I don't want to be putting anything to inventory right now. What I'd like to do is just basically the income statement as of the prior period, the prior year that will then roll into the equity account. It'll just roll into the equity account. So I'm going to put it into uncategorized income on Catholic or uncategorized expense, uncategorized expense here. So there we haven't and I might put a note for something that would say like, you know, this was for inventory. But we recorded inventory in the opening balance, right? So I'm just gonna put this on the books so that we can recognize this checks so we can clear it on the books. But I just want it to be netting out basically to the equity section. If we do so as of the prior period, do an income statement account, it'll basically roll into like the retained earnings account or the equity account that we want it to be. So I'm gonna go ahead and save and close that. I'm going to do the same process for the second check we have. Once again, I'm going to make sure that I write it as the prior time period. I'll make it an expense type form. I'm going to imagine this is just like a utility bill, even though it would be locked for utility bill. But I just want to imagine the case where we have Edison. So we're paying it to Edison. And now we're talking about this vendor has, has a balanced do is to paying off a bill. And I'm going to say, no, we're not paying off a bill. And so then this is going to be for the beginning balance. And then the payment we had here was this is going to be for the 24 000. So we're gonna say 24 000. And then I could put it to utilities if I so choose utilities as long as it's an income statement account that's going to roll into the equity. So that's same thing would be applying. The reason I just want to pick Edison here is because it would be an expense account. We hit an expense account with that last time. The other one we hit an income account, but we still want to make sure that it goes equity and we're going to make it go through equity by hitting the income statement account in the prior period, which we'll roll into the equity account. So I'm going to save those two. So if I save those two, and then if I if I go back to the trial balance over here just to check out, see if that mess how that messes things up or what it does. Let's run the report. And I'm going to scroll up just a bit. So now in this miscellaneous expense account, now we have this item here for for the miscellaneous expense. So this is other it's not in miscellaneous hold on. Scrolling back. It's in the uncategorized expense. So there's the uncategorized expense for the 2600. And then scrolling backup and the other side went to the utilities here for the 2400. So there's the 2400 and the utilities. Now, that's fine because that's in the prior period and these temporary accounts are just going to roll into the equity account. So that'll just close into equity. So if I go back up top for example, and I change this to 0, 1, 0, 1 to 1. The next day, 0, 1, 0, one-to-one. Run that report. We don't have any of those income accounts here. We just have this equity account now, which is at that 70 to 96 because it rolled in basically two, that equity account. So now we've got this amount that rolled into the equity account. But the checking account now is kind of off. If I go back to the prior period, say this is going to be 12, 31 to 0 to 12, 31, 200 and run that report. So now if I go into the to the checking account, we've got the 20000 in the checking account. And note that it should be according to our beginning balances now the 25000, because we just decrease it by that 5000. So we need to increase the checking account for the beginning balance to be right? And the problem is of course, that this 25000 right there, that beginning balance needs to net out. It should be 30000. Now that, that needs to be 30000. Now I can't just change this one though. I can't just change that because the other side's go into opening balance equity. I don't want it to go into opening balance equity. I wanted to go to the other equity account. If I scroll back up top, if I just change that 30000, the other side's going to result in an opening balance equity account, this account, which is we don't want to hit that account. I wanted to go into this account. So I'm just going to make the adjustment. I'm just gonna write another adjustment to it that's going to take the difference then to this owner's equity account here instead of the opening balance equity. So I'll just go back on over. And I'll say instead of adjusting this one to 30 thousand, because it's going to opening balance equity. I'm going to make another item which is basically a deposit to reconcile this amount and take it to the equity account that we want it to go to. So I'm gonna say this is going to be as of 1231 to 0. And then I'm going to, I'm not going to have any P. This is going to be to just opening balance. It's going to be a deposit. And I can't use this form. Hold on to say cancel this. We need a deposit form, drop-down deposit form. Then this is going to be to just opening balance and this is going to be 45 thousand. And the other side we could take to that other income account, just like we did before that we'll roll into the equity account or we could take it to equity directly. So for example, I could go down here. Like normally when I do the opening balance for cash, they put it into that to that opening balance, equity here, that's not what we want. We want it go in into the equity account, the owner's equity, which is kinda like the retained earnings account. We could do that by hitting it directly or I can put it into that uncategorized income again, uncategorized income account. That'll hit the income statement as of the prior period and then once again roll into the equity account. So I'm going to say save it and close it. And then if I go back to the balance sheet here, go back to the balance sheet, run the report again. So now we're back up to that 25 thousand. That looks good. And then if I go back down to the bottom here and just double-check the equity section. And I'm going to say, all right, the equity section is now this everything from here down. So 73396 plus 25 000 plus 500 000 minus 26 000 minus 24 000 minus 16 000 000. That gives at 77896. And that ties out to our R 77896 here. So that looks good. And all this stuff down here, the income statement accounts are going to roll into just this account here and we don't have anything in opening balance equity, which we should not. So if I do that, if I go up to the next time period, so which would be let's just hit the plus button. Plus January 1st, 2021. Now we have nothing on the income statement. We have our starting point here, and then our opening balance equity account has that 77 806 in it. So we're at the same point now and now we can go back and reconcile. I'm going to go back on over, hit the plus button, go down to the accounting, and we want to go to the reconcile item again. And now I'm going to continue resume the reconciliation. Close this off. And now I can say, okay, now I can check these two items off. So I can check these two items off. So I can actually show on my bank rec yet that yes, these two did clear. I check those off and those cleared. And then all I did was just the beginning balance to what it was on the books at 25000 in it should be the cleared balance should be that 5000 still on the books at 25000. But the 25000 now reflects this 30000 minus those two checks that were on there that were unclear as to the prior period and that allows us to check off all these items and have a closer to proper bank reconciliation for the first bank reconciliation that we that we then process. Now the only problem with his first bank reconciliation is simply recognizing that these 25000, this 5000 are the beginning balance items that we entered into the system for our beginning balance. And then these two items, of course, are now we can see the unclear at items that were entered and in the prior accounting system. In our case, we enter them as of 12, 31, 2020 to represent that and then show that they cleared in January. Okay. So now we can finally finish it. We're back to 0 up top. And I'm going to say, let's go ahead and finish this thing finally. So you reconcile the account and so then we're going to say done. So that's the process of reconciled lean doing that process then is a huge internal control, but it is not the reconciliation. The reconciliation is actually the report that's going to be generated that will show what we did in the reconciled Lean process. So we'll take a look at that next time.
8. 9.14 Bank Reconciliation Month #1 Reports: Quickbooks Online 2021, bank reconciliation month 1. In other words, the first bank reconciliation for our data input as we enter it into the QuickBooks on line system, we're going to be focusing in on the report, the bank reconciliation report. Well, let's get into it with Intuit QuickBooks Online 2020 one. Here we are in our get great guitars at practice problem. We're now gonna take a look at the bank reconciliation report after the first month of the bank reconciliation process. To do so, let's first open up our reports. I'm going to go to the tab up top, right-click on it, duplicate that tab. We're going to be opening up then our balance sheet report going down to the reports on the left-hand side. And we're gonna go into the reports. So we're gonna go into our favorite reports that being the balance sheet. Balance sheet, there it is, balancing the sheet. And then we're gonna go back up top and change the date range. Indian at a 130 one to one, running that report R9. So there we have it. There's the 100000, 5850 that we now have in place. And we've done our bank reconciliation process, comparing that then to what is on our bank reconciliation, we still have the difference as of that point in time, January 31st, 2021. That is that the in the 1893 35 is different from of course, the 100000 58, which is now what we have after making any adjustments to our bank statement as of the January 31st, 2021, for items that would be on the bank statement that we're not on our books. So let's take a look at the difference between those two in the reconciliation. Now the reconciliation, I'm gonna go back to the first tab. You would think it would be under the Reports tab here like all the other reports, but it's kind of a different report that reports into the Reports tab on this side are basically the financial reports, meaning balance sheet, income statement, and then all the reports that supplement the financial reports or supplements some line item. Give us more detail about some line item in the financial statement reports balance sheet and income statement. This is a kind of a different reports of reconciliation type of report, kind of an internal control type of report. And so we're going to find that then in the accounting down below, we're gonna go into the accounting. Once you're on the accounting tab, then typically you'll be in the chart of accounts when you're normally working, then you want to go to the reconcile tab where we went to reconcile. And then up top we see these items, summary history by account. Show me around. I'm gonna go to the History by account. And then here we have our reconciliation. If we select that, that's going to be our reconciliation report. Little bit of a roundabout way to kinda get there. If you forget that process, then you could say, okay, what if I just go to Reports and I tried to find it here? And you just type in reconciliation. Reconciliation. Most people probably see bank reconciliation, but we just want to take reconciliation here. And they find that and that'll take you here once again. So the cookie trill being accounting, we're in the reconcile tab rather than the chart of accounts. And then here's chart of accounts bank rec were in the history. Then we'll select the last bank rec that we had. So this is going to be actually our report. Now this is the actual bank reconciliation rather than the process of reconciling. So the process of reconciling is important. But if someone was to ask what you did and you wanted proof of what you did and why you did it, then you wouldn't need the bank reconciliation, which would look something like this. So the first one's going to be a little bit different. Remember we had that one kind of tweak here where we're comparing our books to the bank. The statement beginning balance. The bank statement balance is the item that is wrong. It's not, it's 30 thousand on the bank statement. And on our books we have a 0 item there because we checked it off as basically one of the items that cleared. That's going to be the one kind of twist we put in the beginning balance item that we just have to note and reconcile. It will be then timeout, as we'll see in a second bank reconciliation, everything will work perfectly. So then, hopefully, then we're going to be down here. This is the statement, Indian balanced, and these are going to be the cleared items in the statement. Now normally the cleared items would match up the cleared items here. But again, there's going to be that difference from the 30000 that we had check-off for the beginning balance and then we have the 89335. So here's the 1893 35. Now this is kinda like the actual start of the bank reconciliation because this is the bank books, the 1893 35. And then I want to see what the differences between that and our books. What is on our books is the 158. So on our books, meaning if I go back to the second tab over here, we've got the 1, 0, 0, 0, 550. That's the difference. I went to reconcile those two things. This number that's the ending balance on the bank books as of the ending point of the month, January 31st, 2021. And what's on our books, what's the difference between the two? We have the unclear transactions, transactions that we wrote on our books, checks in deposits in our side of things that the bank has not done yet because they don't know about them at this point in time. So that's really what we want to look into. And then we have the unclear transactions after January 31st, 2021. Not really relevant. And the register balance as of one twenty one, twenty one. These are things that happened after the bank reconciliation point, which isn't, you know, we don't really need those right now because we're focusing in on the reconciling as of January 31st. So really, this top part, the summary, what we're looking for is these three line items. And so that's all we really look for, APTT up top when you're looking at just the bank reconciliation, that's what we really want. But this item here, this is the key point because those are the reconciling items and that 10,007, 23 is just one number. I want to know what those are. So now I need the detail of these numbers. So when I scroll down, they're going to give us the detail of all these numbers up top. I don't really need all the numbers detail. I really need the detail for these items because those are the items that are outstanding. Those are the reconciling items. So if I scroll down here, we've got the checks and payments that cleared. I don't really need this information. This is some kind of weed through this stuff. So you can read the bank reconciliation. It looks at really like a burdensome report the way they put it together because they have a lot of information that's probably above and beyond what's necessary just to see a bank reconciliation including this items up top, these are the cleared items and we already have those cleared items because items that we checked off here on the bank statement and we check them off during the bank reconciliation process. We know that that those basically are the cleared items. So that's not really any new information that clear deposits are the same. Those are the items that are actually on the bank statement. This is what we want, the unclear checks and payments as of a 131 21, these are the reconciling items and these are the things that we entered in January or before, right? That have not yet cleared. This is the difference between the bank balance as of January 31st, 2021, our date of reconciliation here, so we have these items. These are what we wrote that didn't clear. So these things were not as concerned with him. In particular, we didn't do the whole bank rec just to find these items and then double-check them. Although we can, so we can double-check these and hopefully they're okay because that just means that we wrote them in January. They didn't clear till sometime after January. We typically do the bank reconciliation. After January, we need the bank statement to do so. So it's probably at least mid-February by the time we reconcile. So most of these probably have cleared if I just go onto the online banking, I can see that they've cleared in February. Everything should be good. So to find that these clear, it is not really the problem, but to know exactly what the differences between the bank statement in our books like to the penny, then that gives us a really high assurance, not only that these are fine, but that everything is fine because we tied it out so closely. We have two people that came out to basically the same numbers. The only difference being the timing difference to lack of information on the bank side compared to our side. So then we have the deposit, we would say the same thing down here. This is the unclear deposit. This is part of the difference part of the reconciliation process. And these these numbers, if we were to add them together, that deposit and those checks, then if I add these together, that 15.515946 minus the 2006 six 700, that's that 10 thousand 723. That's this number up top that we're concerned with, that 10 thousand 723, we want to know exactly what that is. That's what an auditor would want to know and that's what's broken out broken out down here. So this is the key component of the detail of the report that you're going to want to see. Like I said, you can check on these numbers if you verify that these numbers did clear there. Okay. Not only have you verified these numbers, but now you've verified everything that is in our system. Basically double-checking it because once again, we have two people that have done the same work and come up to the same answer, given us a double verification that we have done things properly. So that's a huge, huge internal control because once again, cash is involved in all other kinds of areas in the accounting process. So then of course we can print this and you probably want to print these out as you go. So I would print them out as you go. I'm going to print them using the QT PDF printer, which is going to print it to a PDF file. So I'm just going to print this out and then save this. It's going to ask me where I want to save it. So say I'm going to save it in my february documents right there. February Docs. Let's just put it I'll put it in there. And this is going to be the bank rec I'll just call it fake wreck and 440131 to one. And so that'll be there and you'll have the completed thing in your, in your example file. So you can kind of compare your bank reconciliation with this bank reconciliation.
9. 9.15 Bank Reconciliation Month #2 Deposits: Quickbooks Online 2021, bank reconciliation month 2, or in other words, for the second month of operations which should reflect the normal process going forward for the bank reconciliations, which will be a little bit easier than the first bank reconciliation that are often being problems unique to the first bank reconciliation process. We're going to be focusing in on the deposit side of the bank reconciliation process here. Let's get into it with Intuit QuickBooks Online 2021. Here we are in our get great guitars practice problem. We're going to be looking at the second month of the bank reconciliation process after having done the first month in prior presentations, we're going to start off by opening up another tab and open up the balance sheet. Let's right-click on the tab up top, duplicate that tab. And then we're gonna go to the reports on the left-hand side and will be selecting the trial balance. So we're in the reports left-hand side. Actually, we're going to be selecting the balance sheet. Let's just take a look at the balance sheet. We could look at the trial balance, but I'm going to go to the balance sheet and we're going to have the date Indian Point at 02, 28 to one. So for the second month of operations to 28 to one, I'm going to run report. I'm going to close the hamburger to get a hold control down, scroll up just a bit. And then we have the 10962, 37. So we're imagining another month has passed. Or we could imagine just to do it just as we have done here. We've entered two months of data input, and now we're reconciling month 1 and month to month one has now been reconciled. This is what we have at this point in time as of the end of month two, we can compare that to our bank statement. This is our mock bank statement. It has the beginning balance. This beginning balance now matching what was there on the Indian balance for the prior month. So our clear the balance now when we reconcile should be correct. That clear to balance represents what has cleared the bank, not necessarily what is in our books. And so this is our cleared balanced. We have the additions and subtractions to get to the ending balance that has cleared. And we know it's cleared because we're talking about the cleared items because there are a 100 the bank statement here. So this 107 or this one hundred four hundred seven hundred forty four sixty eight is what we have here and on our books we have this one hundred nine sixty two hundred thirty seven. So we want to see the reconciliation that difference between those two items as we do that, if there is something that is on the bank statement that's not on our books. It's most likely the case that we're going to have to add them to our books unless the bank made an error, which is not typically the case. If it's on our books, but not on the bank statement, then it could be an outstanding items, something that we put into our system that the bank does not yet know about due to it being a timing difference. That's the reconciliation items that will then be on the bank reconciliation report that we will see once we complete this process. Let's go back to the first tab and then go on down to the accounting down below. So we're gonna go to the accounting. We want to go to the reconcile tab, the second tab over I'm going to hold the I'm going to close the burger, hold down Control scroll, scroll down just a bit. So we're back to that 100%. I'm going to remove this message that keeps popping up. And then now if, if you will have a different screen, possibly if you haven't started this process yet once you're into the beginning balance, I tested it out. So I'm going to resume the bank reconciliation and then I'll show you the data for the input screen, which will look similar to your input screen as you start. So I'm going to go to the resume. And then the beginning data information will be up top in the edit information. So I'm gonna go into the edit information. And now we have our beginning balance item here. So there's the beginning balance. It pulls over correctly that beginning balance should reflect what is on our bank statement we have received. That should always be the case now we're never going to have a problem again with that beginning balance problem unless we do something funny to it, right? So it, but we should roll forward and should be much easier now that we don't have that beginning balance issue. So that's looks good. And then I'm just going to type in the Indian balance hears would just type in that good old ending balance to one hundred forty seven, forty four, sixty eight. And if we have the same starting point and the same Indian Point, then the difference the items that we check off, if we check off every item that's on the bank statement here, that deposits and the check, then we have to reconcile. It has to work because we're just checking off the exact same numbers. If we're talking about the same numbers here, same starting point. And then we check off the additions in the subtractions that are making the difference between this number and that number in our books, we will come up to the same cleared number, meaning the same cleared number being the one hundred forty seven forty four sixty eight. And it's cleared number not representing what's on our books necessarily. It represents what we marked off as cleared. The items that we do not check off over here will be the reconciling items, those things that will be on the bank reconciliation showing the difference between the books and the bank statement. Then down here we've got the items that we could record for service charges and interest as we go. I don't like to enter them here. I like to just enter them directly into the register, so I usually don't do anything here. If I need to make an adjustment, I'll go directly to the register and do it there. So I'm gonna go ahead and save this. We have our starting point. This is the statement balance, the one hundred forty seven forty four sixty eight. That's the ending balance on the statement. So we see that here. And then we have what we have so far, the 89335, That's basically our beginning balance because we have not checked anything off yet. The difference is reflected over here, that's 15, four O nine. And obviously when this difference gets back to 0, that will reflect the fact that our cleared balance is now at 0, reflecting the fact that our reconciliation process might be over at that point. So we can then create the bank reconciliation, which is actually the report. We then have the beginning balance over here, the payments and the deposits. So as we check these items off, we'll have the items for the payments and the deposits that will be affected down below. We can then sort our information using our sorting fields here, the most common and useful sorting, typically being, being able to see them by deposits and payments. I'm going to say the deposits is what we're focusing in on here. When we focus in on the deposits, typically the date is going to be pretty close to when we deposit it because we don't have a big difference, the banks should know or be able to process our deposits fairly timely. So the date will be relevant with the deposits. It'll be something that'll help us to figure it out. And then the amount, those are the two things that we mainly have for the deposits. If there are electronic deposits, you might have some other digital information that could give you like vendor information and what not. But if you deposit money into the bank like cash, then all you're going to have as the amount and the date. And so that means that you want to make sure that when you make a deposit into the bank account, as we've discussed in the past, I wanted to group them in the same format as do you expect to see them on the bank statement? You want to think, how's the bank go into group that deposits match the way they deposit it in their books, on our books with the help and use of the UN deposited funds account. If you need to use that process to make the reconciliation as easy as possible. Also note that if you turn on the bank feeds, the bank feeds might be able to help to match out, which helps you with your reconcile late teen process. It'll help you to kind of match these two out, but all it really has to go on is once again the date and the amount. So those two things have to tie out, erodes the Earth's, the reconciliation of the bank feeds won't be able to kind of match them up and you still will have to kinda do it manually to figure that out. So if these line up, that should be a pretty easy process, we're just going to remember that we're going from the bank statement to the books because if it's on the bank statement, it needs to be on our books. And if it's not, then we'll probably going to have to add it. It's on our books, but not on the big statement, then that's probably it might be an outstanding item. This so that's why we're always going to go from the bank statement to the books at least when starting. So there was a 26 670. Here's the 26 670. Checking that off. And then I'm going to yellow phi this one to indicate that we found it. So I'm going to try to yellow phi, which is difficult there it is. And then I'm gonna go back and there's the 12 250, the 12250 over here, and then we have the 12 250. Now note notice. The date here is on 22 and the date on the bank statement is on 29. So it should be pretty close to the date, but the bank statement will always be later. The bank statement is always the lagging compared to what we do. It's always behind us. Because what we do, we know when we did it, we know when we entered into the system. So in the bank doesn't know until they get the information they cleared. The bank. If it's an electronic transfer, it should be within like three days, you would think. So 20, 25, 20, 25, and here's the 20, 25 there. And so there we have that, that one has been found. So we found everything on the bank statement with the deposit side of things on our books. We also know that this beginning balance is part of the process too. I can kinda check that off because that, I can check that off because that's part of our beginning numbers which we saw here. It's included here, it's included here. So that's kind of part of our math that we're thinking about. But we see that this item, this deposits on our books, but not on the bank statement. Those are the things we're expecting to happen. That's fine because once I check all these off, these are the things that are going to be reconciled items which will help us to get to the reconciled balance, the balance that will match on the bank statement, the one that we wrote in February that didn't clear in February, then will be the reconciling item, the difference between the book and the bank numbers and that'll be on the report as basically that difference. If I'm concerned with that number, then I could say, Hey, look, it didn't clear the bank statement. That's that's fine. Because then I can go to my online checking and take a look at the online banking and see if it cleared the month after, which in this case would be marched. In. Note that when we do the bank reconciliation for February, for example, we're going to do it at some point in March, most likely because we're going to need the bank statement in order to simply start the process of doing it in the first place. So we can't go to the online banking. We're going to check, hey, did that clear in March? If it did, then we're saying okay, then it's okay. I know that that deposit is good. It's just a timing difference. That timing differences what we are looking for so that we can reconcile the book balance to the bank balance. And when we do so, we know about not only this outstanding item, but all the bank that'll help us to tie out all the items that have been entered into the system. Also note that this one is pretty it's still on 223. So you would think it would have cleared by the end of the month. So you might have concerned with that one. Obviously say, Hey, you know, it should only take a couple of days to clear, why did it take so long? So you might contact a bank in that case and have some concern. It's more likely that if it was a deposit it'll be pretty close to the end of the month. But again, you can kinda check it to the bank and see if it cleared in the following month. And if it good if it did, then it's a standard kind of outstanding item and that's what we'll stand here. So that's what we're gonna do for this side. I'm going to go ahead and save it for later. So we're going to say, All right, I've done like half my like a quarter of my bank reconciliation. I think it's time for a break, get some coffee. So we're going to save this for later and then we'll come back to the other side of it next time.
10. 9.20 Bank Reconciliation Month #2 Cash Decreases: Quickbooks Online 2020 one, bank reconciliation month two or for the second month of operation, we're going to be focusing in on cash decreases in the bank reconciliation process. Let's get into it with Intuit QuickBooks Online 2021. Here we are in our get great guitars, a practice problem. We're going to be continuing on with our bank reconciliation first, opening up our balance sheet and duplicated in the tab up top. To do so, we're going to go up to the tab up top right-click on it, duplicated the tab up top, down to the reports on the left-hand. Then selecting our favorite report that being the balance sheet report, opening up the balance sheet report. We're going to arrange change it for the second month that month at a time in point the point in time in which we're doing the bank reconciliation, which is 02, 28, 21, and run that report. And then I'm going to close up the old hamburger here. We're at the 10, 962, 37. We're comparing that to the bank statement over here. Here we are The Indian Point at that same point in time on the things that MIT one hundred forty seven forty four, we're going to be comparing those two with the use of the bank reconciliation having started it last time focusing and last time, however, on the deposits this time focusing in on that decreases, those being the checks and payments. So let's go on back on over one. I'm going to go to the first tab. We're going to go on down to our accounting down below. We're in the reconciled tab that we have started in a prior presentation. We're just simply going to resume the reconcile. Resume the reconcile. Going to close the hamburger up top. We started off with the information in the Edit tab, beginning balance 89335, that ties out to the 89335 there as it should for all times going forward except for the first bank reconciliation. If you're doing the first bank reconciliation, take a look at the prior presentation. We addressed problems unique to the first one. Then we have the ending balance which we entered manually, the date of the reconciliation. That's all we need there. Closing that then out within selected the deposit side of things we tied out from the bank statement to the to the books and we checked everything off and we have this one outstanding item which will be a reconciling item. Now we're gonna do the same for the payment side of things. We're going to be selecting the payments in the reconciliation tab. We can then sort it by date, which is most common, or by other factors such as the reference number or amount, which can be useful as well. We'll keep it sorted here by the date. Once again, we're going to be comparing from the bank statement over to the books. If it's on the bank statement and it's not on our books, then we probably have to add it, meaning the banks probably correct. We just didn't input it on our side for whatever reason, we're probably going to have to add it unless the bank is incorrect or wrong, which is not generally the case if it's on our books, but it's not on the big statement, then that may be okay because it might be an outstanding item that just has not yet cleared. The bank, bank doesn't know about it yet. This will be more common and you'll have a longer range of a timing difference when you're dealing with checks than with deposits, deposits being electronic transfers. Oftentimes, therefore, the bank should process them quickly. Checks Nate, take a longer time, especially if they are a manual check that you've printed Yeah. Male to somebody, they have to then get it, deposit it into their bank. The bank needs to talk to our bank. That could take longer. So note that on the decrease side of things, we could have a larger timing difference. And that means that the date that's on the bank statement may not be as relevant as well for us to take and tie off from our books to the bank statement, meaning this time here could be substantially after when we entered it into our books, making it a little bit difficult to tick and tie these items out. So when we take anti these items out, then if it's a check, then we have the date. But the dates probably not gonna be as useful because of that big timing difference. We've got the check number that can be useful to help us to tie things out. And we have the amount that of course can be useful to help tie things out. If we're talking about electronic transfers, we will not have a check number. However, the date should be more relevant because an electronic transfers should clear the bank predict pretty quickly. So the date will then help us to tie things out. The amount will of course, help us to tie things out. And we might have more information from the electronic transfer that will give us an indication of the vendor or things like that, which can also help us in those cases as well. So we're going to be taking time off from the bank statement over two, over two the books here. So we're going to start off with the 11 thousand. And this cleared the bank on 25, check Number 1, 0, 0, 5. So if I go back on over, there's the 11 thousand. And if I look at it, there's the 1, 0, 0, 5. And this is an item that was written in January. So it was written in January, it's clearing in February. Let's just get a better idea of that. I'm going to go to the tab, to the next tab over. I'm going to duplicate this tab, right-clicking on it. Duplicate this tab. And let's see if we can go down to the report that we generated last time for January. So I'm gonna go to it. It's not actually in the reports, it's in the accounting tab down here, even though it's kind of a report as we've talked about in the prior presentation or a prior presentation. And then I want to look at the history, the history tab over here. This is the January bank reconciliation. If I go into the January bank reconciliation, we have in these outstanding items. So these were the items that were unclear. So these were the reconciling items last time, including that $11 thousand we wrote it in January. It didn't clear the bank in January. Now it's clear and in February, that's what we would kind of expect to see. So here it is. We got that 11 thousand now clearing over here, I'm going to go back onto the bank statement. I'm going to make that color. We're going to highlight this saying, okay, we found that then the 500 on 25, the 500 on 25, there it is. Once again, we wrote that in January. Therefore, if I looked at the blast bank reconciliation, there's the 500 which was unclear on the last bank reconciliation which is now clearing Now, going back on over, these are the timing differences. I'm going to go back then to our item here. Let's sluts yellow phi that one. Then we've got the check number 10103457. So here's check Number 1, 0, 1, 0, 3, 4. So check number 0100 and the 34, 57. So here it is, 345770. Once again, we wrote that in January, so it was outstanding last time. 3457 was outstanding last time. So I'm going to go back on overall, it's yellow five, that one because we found it. That's what we do when we find stuff. And then we've got the 628 AT. So 628 AT is here. So once again, we wrote that in January. That's another item on the prior open items last month. So we had the how much it was that again? The 620 8080. So there it is, 628 AT back on over here. Let's yellow phi that. So these are all things that we wrote in January that are now clearing check number 1011135875. So 135875. There is that this one we wrote in February. So now we're to things that were written in February and cleared in the same month. So let's yellow phi, that one. Nothing unusual there. So that's what we expect to see. We're back kind of a norm. So now we're at the 33603360. And so there is that 1031013. So there's that looks yellow phi that one. I missed a 0, but that's okay. 135873. So I'm going to say are 135873, there's that one. Notice they might not be imperfect order here. And that's okay. Because they could clear they could clear the bank on different dates than than when they were written. So there are in our books possibly in a different date order than the bank books. And then we've got the 16 and 17. 17, so 169, 770. And that's down here, so that looks good. Picking that one up, yellow five. And then we've got that. Let's do two at a time. Let's get crazy. 380 and the 156, 123, a 156, 12. That was impressive. I'm going to yellow fine. Both at the same time too. Ok. And then we've got the 66 754. So the 66 754, there's that one. So that looks good. We found everything that is a normal check or like electronic transfer and we're all we don't have the withdrawals still and the bank service charge. Those are typically things that we may not always have on our side. And we should have the withdrawals if we pulled out cash, but we may not we don't in this case, we've got the 520 that were that were different and there's our difference. So as soon as I add those two items, we should be okay. So we've checked everything off except those two items and all these items that are in blue then are the ones that we checked off. That means that the cleared balance up top is close to balancing. We just need to add that 520 and the cleared balance will balance, meaning everything we checked off plus the beginning balance will tie out. But that's not our Indian balance because our ending balance still includes these items that we did not check off. The items that we did not check off are the reconciling items, the things that are outstanding, the things that we expect to clear in the following month, most likely. So you can then double-check these. I could go into these and say like this one, for example, is concerning because I wrote it to the telephone company. You would expect that it would have cleared within a month. So that one I would be concerned with, I would want to check it and say now, I'm reconciling as of February. I may then want to then go into my online banking and see whether this has cleared in March. Because now if I'm doing the reconciliation in February, it's gotta be sometime in March because I must have the bank statements to do it, which wouldn't be out until sometime in March. So I can't go to the online baking and check and see if that has cleared. If it has not cleared, then of course I might want to contact the telephone company and say, hey, look, it looks like I've made a payment. And it's not been cleared. What's going on over there? Did you get the check that you get the payment? And then that's what the bank reconciliation will kind of help us out to do in that instance, these items down here, they were written on 228. So we would expect then that those may not be cleared at this point in time because they were written at the end of February. So it could be quite normal that they wouldn't clear the bank until sometime in March. But once again, we can check that I can easily check in March because by the time we do the bank rec it will be March and we could check them if they have all cleared, then that's great. That not only tells us that we're okay with those items being timing differences, it also tells us that all other items that we have entered into the system are good. It gives us a much higher verification that the whole thing is correct. And if the whole thing for cash is correct, then because cash is involved in every cycle, That's a huge internal control on every accounting cycle. So that's going to be what we do now. Now let's go to the, to add these last items, these 520 items here. So let's go to the tab all the way to the right. And well, I can do this a couple of way. Let's leave, let's leave here. I'm going to say save it for later. And then we'll come back into this item. And then I'll go back to our our hamburger into the accounting tab which were already in. And then I'm going to go to the chart of accounts. Chart of accounts. And let's just use the register that inter those items. So I'm just gonna go with checkout that register. And then we're just going to be adding these last two items, the 500 and the 20. So the withdrawal with 500. Now withdrawal means that the owner took the money out of the bank account. So the owner just drew money out. If you're drawing money out and it's for business purposes. If you're going to use money for business purposes and you want to deduct it on your tax returns. You want the audit trail there. You want to have the information so that if there's a question about it, you can answer that question easily. So you don't want to be drawing money out, typically cash out of the company when you're making a business payment, you what you wanna do is have the audit trail, which means you want to pay by check, electronic deposit or electronic transfer or credit card or something like that that has the audit trail. So if you're a bookkeeper, I would recommend to people, to clients, hey, look, don't spend cash on business things because it takes more work to get the audit trail then you might have otherwise to do. If you do do that, if you spend cash on things, you can have to give us receipts and what not. We're gonna have to enter that into the system and make sure that we're categorizing things properly. So we would like you to only be taking cash out if you're going to then use it for personal use. If you're going to use something for personal use, don't take them money, then don't right? A check out of the business account for personal use, but rather take the money out in cash or transferred to your, to your account, your personal account, and then spend it on personal use. And that way, when when money is just taken out of the account, we can always categorize it as a draw. And that's what we'll assume this time. Last time we assumed that the withdrawal that was taken out with some kind of business related item. If it's a business-related item, it's going to decrease the net income, which could be good for taxes. But again, you need to know the categorization of it. If it's going to be, if it's going to be a draw and then we're going to put it to an equity account, two draws also just note that if you do spend money for personal use out of the business account, like let's say you just, you know, you spent money for Disneyland or something like that out of the end, you spent it out to your business account because that's where the money was. Then you can't just simply re-categorize that when you put that into the system, you don't put it in as an expense, you put it in basically as a draw and you put it into the equity section. You don't want it, so you can't do that, but you don't want to always be spending money out of the business account because it's confusing, especially if you have another if you have another bookkeeper working on it. Because now the now when you do your bookkeeping or if you have someone else do it, they have to know whether or not this restaurant or that item or this or that was business or personal. And that's a lot more work for them. So if you just have a separate account and you just take any say this is my business account. Everything I spend out of it is business-related unless it's a draw and I'm transferring it to my personal account, in which case it's a draw, then that would be the easiest system to use. But again, you can't kind of, if you spend something out, if not the end of the world, if you spend money out of your business account, you just have to be more careful and allocate that out to draws and whatnot. So in any case, we're going to say that this time this was a draw, last time it was a expense. So I'm gonna go back on over here. Say we're going to say this is going to be a new item. It's going to be like an expense type of item. I'm going to put it on as 02 28 to one. And I'm just going to say this is a draw. This is a draw. And we're going to say that this was for $500. It's not going to go to an expense now, but some type of equity account. Let's take a look at the equity accounts when it hit the drop-down checkout, the equity accounts here, pick the one we want. So notice you might just put it if it's a sole proprietorship. Then you might just put it to the equity account because there's only one owner, but you still might want to break out. So notice we broke out the investments. That's the owner putting money into the company instead of just put it into one equity account. And we're going to break out then the draws which QuickBooks calls, Hey, quit owners pay and personal expenses. So when they say owners pay, don't confuse that with payroll. They're trying to just the usually it's called draws, but they're trying to indicate that, Hey, look, if you paid for personal stuff, then you should put it to this account. That's what they're doing here. Now if it's a partnership, then you're gonna, you're gonna have to break it out partner by partner. And you could break out each partner and then another equity account for their particular draws. And so you can use that kind of system, but this is what QuickBooks has setup for us for the sole proprietorship. So I'm going to pick that out. And there we have it. What's this going to do when we record it? Decreased the checking account other side not go into the income statement, but rather directly to the equity section. So let's say save it and close it. Let's check it out. Go to the balance sheet tab on the right. We're going to make it a fresh, fresh and up the report and hold down Control scroll up just a bit. If I go into that checking account, then and scroll down, we've got on into February. We had that $500 there it is. So there's the 500 decreasing the checking account back on over the other side, not go into the income statement, but rather than going down here to the equity account where we have the PE personal. So here's the pay personal. So here, down here, the opening balance equity, we're not using that anymore. Owner's equity. That's kinda like retained earnings. That's where the income accounts flow into on the balance sheet. Owner investment, the owner investing money into the company, owners draws, That's the owner taking money out of the company net income. That's the money on the income statement that's going to roll into the equity section which will eventually go to and should be in the owner's equity. So if I change the dates that would just roll into the equity, which is kinda like the retained earnings account. Let's go back to the first tab again and let's do this for the other ones. So the other one was the bank service charges, $20. So same date. And I'm just going to say this is a payment $20 bank service charges, bank service charges, and that's it. This is going to decrease the checking account. The other side then go on to the income account that bean, the bank service charges lowering the net income. So I'm going to save that. So there we have it, those two items included. Now I'm going to open up the burger again and go down to the accounting. And so we should be able to check those off in our reconciliation, we're going to go to the reconciliation tab up top close up the burger, and then scroll down and we're going to resume reconciling. Resume reconciling. And then if I scroll down, we can find then those two amounts. So there's the draw for 500, that's the one, and there's the $20. And now we're at 0. So once you have that green check mark, then of course we're tied out. That means that the statement balance equals declared balance, meaning This isn't our balance, right? If I go to my bank statement over here and I refresh and see here we're at the 108, 542, 37. If I go back on over here, that doesn't match the cleared balance. That cleared balance means all the things that we checked off. Our balanced includes all the things we checked off and didn't check off. The difference between the cleared balance and our balance is the things we didn't check off. The things we didn't check off, we're going to be the reconciling items. When we get to the bank reconciliation report, which we'll take a look at next time. But the fact that this is 0 means we did the process of reconciled lean and that's really important. That's good. We're gonna go ahead and finish this off and celebrate somehow somewhere doing something good. So you receive this account, you reconcile. And so next time and next time we'll take a look at the report. Thank reconciliation report. That is.
11. 9.25 Bank Reconciliation Month #2 Report: Quickbooks Online 2021, bank reconciliation month two or the second month of our bank reconciliation process. We're now going to be looking at the report, the bank reconciliation report. Let's get into it with Intuit QuickBooks Online 2021. Here we are in our gateway guitars practice file. We just did the second month of the bank reconciliation. Now we want to take a look at the bank reconciliation report. Before we do so, let's open up a new tab and our balance sheet on it. I'm going to right-click on the tab up top. Do so, duplicate the tab. Then we're gonna go to the reports down on the left-hand side we're going to be selecting then our favorite report that being the balance sheet. That being the balance sheet, we're going to go back up top. We're going to say this is going to be as of the end point of 02 28 to one, running that report, closing the burger, holding down Control scroll up just a bit. We are now at as of this point in time, which is the point in time, we did the bank reconciliation 108, 542, 37 on our books. And we're going to be tying that out to what's on the banks books. So we did the bank reconciliation, everything that was on the bank's book, everything that was on the bank statement, which I kind of like a bank's books for us, the bank statement of our books that they're recording, then if it was on the bank statement and not on our books, we added it such as these two items down here. If it was on our books and not on the bank statement, then those would be our outstanding items. Therefore, the Indian item here, the one hundred forty seven forty four hundred sixty two as of the date does not match what is on our books, even though we've done the bank reconciliation process because of those outstanding items, that bank reconciliation report will then give us what those outstanding items are. Let's check it out by going to the first tab. And you would think would be under reports, but it's not you can kinda find them there, but it should be down here under the accounting. So it's under accounting and then reconcile. And then you gotta go to history by account. And so now this gives us both of our bank reconciliations, which is nice because sometimes some software only gives you access to like the last bank reconciliation you did. But we have both of these lined up here. We did month month one, month 1, and month 2, January and February, one after another. If you forget to get here in this format, you can also look for it in the reports on the reports section and just simply type into like the fine screened you would probably think bank reconciliation, but just type in reconciliation instead. And then it'll say boom. And then if you go to that fine search thing that takes you right where we were a second ago. Accounting, reconcile tab cookie trail, go into the history by account. We're now looking at the second bank reconciliation, the latest one on top, that being February 28th, 2021. Opening that then closing the hamburger. Here's our report. So the way they kinda break this out as they get the summary on top. So we got some information. I'm going to try to 0 in on the information that's most important to us. This first item here, statement, beginning balance. So that's the beginning balance on the bank statement. Not the most important thing for the bank reconciliation, but it's nice, it ties in right there. So there's our beginning balances. Then we have the amount of shakes and payments that decreases and then increases that deposits the 25 535, and the 40000, 945. That just mirrors what we have in our bank statements. So again, not the most important thing. And that gets us down to the one hundred four hundred five hundred forty four sixty eight. So there's the 14 seven forty four sixty eight. So this is kind of the beginning of our reconciliation process. So the bank reconciliation in summary is basically this number. And then the unclear transactions, those being the unclear checks and deposits getting us to the register balance which is the 10 eight, 540, 237 that then matching what's on our balance sheet, go into the second tab to double-check that. There it is, 108542 37. Looks good. Back to our report. So in summary, these three numbers, those are the important ones. Those three numbers, if having an audit if auditor then asks for the bank reconciliation are the ones that are concerned with, then they're gonna say, hey, look this number 379 1769, we need more detail of that. I want to know exactly what the checks were and deposits were that are constructing that number. So the QuickBooks report that gives you all this other information that reconstructs everything, which again, you don't need most of it for normal kind of bank reconciliation. For example, they've got the checks and payments that cleared. And that basically just mirrors what is on the bank statement. So let me jump on over that just mirrors these items to 11503457 and so on. So that's just mirrors these items. So that's not really new information that adds up to the 25, 5, 35. And then we've got the deposits, which again just mirrors what's on the bank statement. If we were to jump over the bank statement, there's a three deposits adding up to the 25, 535, 30 to actually sorry, that adds up to the 40,945. So 40000, 945. And then the important thing, the unclear checks and payments. These are the ones that we wrote in our books. In February and or before, but most of these are in February. I there's one in January that one didn't clear all the way since January. These are the ones that we wrote before the bank statement date, end date, which in this case 228 2021, which did not clear. They're not on the bank statement and therefore, these other reconciling items. So I want to know what these are down to the penny really, because that means that if I know exactly what the difference is and I can legitimize these items as being correct, not just like a plug number that was put in place. Then then that means that everything else is basically got a pretty good high level of assurance that they're correct because we know exactly what the difference is. Once again, if we wanted to check and double-check any of these numbers, we can do so by simply checking our bank account as of this point in time because when we do the bank reconciliation, for example, on or for February 28th, 2021, it will be sometime in March and we can check online baking to see if these items have cleared in March to verify that those are legitimate items in that there's no problem with them that they have cleared and therefore they're legitimately unclear, legitimate, legitimate timing differences. Differences that mean that we know what the books should be because we entered them correctly. But they have not yet cleared the bank as of this point in time. And then of course, we have the deposit down here as well for the unclaimed deposit, same kind of scenario. And these if we were to add them up, which we'll do now of course, if we add these up because that'll be fun. They add up to 50, 74.01 minus the 8.70871. And that's going to be that 379769, which is, which is going to be this difference. So now that's where the difference is. So if an auditor was to ask for this report, which are really looking for is here, there's the bank balance, There's our book balance. There's what the difference is. Now I want to know what the actual difference is in terms of checks and deposits because that's just like a number to me. I want to know what the actual things are so that if we wanted to double-check that audit that verify that, then we can go to those line items and see if they cleared at a later point and therefore see that they were indeed just timing differences as a point, as the point of the bank reconciliation. So there's where we stand now let's go ahead and print this thing out and we'll save this one so you can kinda review it on your own time, compare it to what you have. So we'll print it out up top. I'm going to go ahead and use the qt PDF printer to print it as a PDF file and printing that out, it's going to ask me where do I want to put it in? I think now it should. There it goes. And then I'm going to put it in here. I'm going to say this is going to be the bank rec this is going to be the thing. You can't see. My fingers are on the wrong thing. Bank rec and this is O2 dat 28 D21, O2 dot 28 D21. And save that. That's where we stand at this point in time. Also note that I'll open up a trial balance because we have made some changes to our books during the bank reconciliation process because anything that was on the bank statement that wasn't on our books, such as the bank service charges and in our case, the withholdings, the amount that was taken out, we had to include that's also often part of a bank reconciliation process as well. It's not part of the bank reconciliation because we're not going to put it on the actual report. We're going to possibly or most likely correct them, correct what we need to correct when we do the bank reconciliation process. And then we'll make the bank reconciliation report, which will just include the outstanding items, which are the timing differences. So to do that, I'm going to right-click on the tab up top. Duplicate this tab. We're going to go to the reports on the left-hand side. And let's open up the trustee, TB, trustee TB for the trial balance. So the trial balance there it is. Opening that up range change. I'm going to bring it all the way out to December 12, 31 to 1, even though there's no data in there, I believe after February, but we'll run that report and then close up the burger hamburger hold down control. It's already at 12 5. This is where we stand at this point in time. We will also be printing this out. So if you want to check your numbers now or on your own time, you can do so.
Robert Steele
