QuickBooks Pro 2021 #3 Bank Reconciliation

1. Introduction: Quickbooks Pro 2021, number 3, bank reconciliation will be a project-based course where we'll actually go through the process of a bank reconciliation. We have the information down below and some items to download the general process than being downloading the backup file, restoring the backup file, and then going through the bank reconciliation process in a step-by-step way along with the instructional videos. If you do not have access to QuickBooks Pro, the latest version of QuickBooks Pro would be preferable than you may be able to get access through a 30 day free trial. You can go to this link here or search in your favorite browser for QuickBooks Desktop 30 day free trial. As you do so, make sure that you are looking into the desktop version, which will actually be downloaded onto your desktop here. And then you can restore the backup files as opposed to the online version. This course is going to be utilizing the desktop version. Once we have completed the bank reconciliation process, we can print the reports including the bank reconciliation and at the financial statements that then being our project. 2. 9.05 Bank Reconciliation Myth Busting: Bank reconciliation, mythbusting. Let's get into it with Intuit, QuickBooks Pro desktop 2021. Now, here we are in the get great guitar homepage. We currently have the open windows open. You can open the open windows by going to the View drop-down, selecting the open windows list. Before we get into the process of doing a bank reconciliation, I want to talk about a few misconceptions, a few myths about the bank reconciliation process. I want to do this because it's important to be clear about what the bank gets. Reconciliation process is, many people are actually good at doing a bank reconciliation, even though they may not know exactly what the bank reconciliation is. And that's, and we want to basically understand that because the bank reconciliation is one of the main internal controls that we can have. The biggest internal control, which is going to be a guard against us making errors is the accounting software itself because it forces us to do a double-entry accounting system, which means the balance sheet is always imbalanced. Just using QuickBooks will allow us to do that. The bank reconciliation is kinda of a number 2 thing. The biggest internal control thing we could do to verify that our data what is accurate. So we want to make sure to do that if I get basically a bookkeeping system that is in QuickBooks without a reconciliation process, I have very less faith. My faith and the accuracy of the data goes down a lot. Now, it being in QuickBooks means that, that I feel better about it than if it wasn't in QuickBooks at all. And there wasn't basically a double-entry accounting system being used if it's just an income statement that's put together without any double-entry accounting system, without the Double-check of QuickBooks, than that, that would lower my faith further. Right. So the fact that it's in QuickBooks would raise my faith a bit a good deal. And then the fact that we have a reconciliation to the bank statement would give me a lot more faith basically in general as well. So the two myths related to the bank reconciliation is one, people often think that the process of doing the bank reconciliation is actually the bank reconciliation itself. And two people often, you see this a lot now because of the way the bookkeeping system has kind of changed and you've got these automatic bank feeds, meaning you can kinda connect to the bank and be taken your data directly from the bank. Because we're taking our data from the big. Many times, people start to think that that is the reconciliation and therefore the bank reconciliation is obsolete these days. I've seen these, these things actually be said that bank reconciliation is no longer relevant. The bank reconciliation is obsolete because of bank feeds, because you can link to the bank. And that's not true as well. So there's some facets that might change in the processes of us doing the bank reconciliation. But it's not true that the bank reconciliation is no longer relevant. So let's take a look at those two things. The first is the process of doing the bank reconciliation. So versus what a bank reconciliation is. I mean, the bank reconciliation is the report that's going to be processed after you do the bank reconciliation. And the summary of a bank reconciliation is tying out our amount on the balance sheet as of a particular point in time for cash. For a particular bank account to what is on the bank statement. And so you need something that looks kinda like this. This is in summary of a report that would be generated from a bank reconciliation within QuickBooks, which would be like this is the cleared balance. Maybe these are the items that are going to be in transit have not cleared, meaning their checks that have been written that haven't been cleared yet, or deposits that have gone into the bank we have recorded that have not cleared. So this report is really the bank reconciliation because it reconciles our books to the bank as of a particular point in time. And in so doing, it gives us more faith about all the data that we have input into the system. If we can say, in other words exactly what the difference is, I can I can show you each and every check that is the difference to the penny if possible, between, between the bank balance and the book balance, then that gives us more assurance that all the transactions are are correct because they have to be if it's off by anything, if it's off by a few dollars, then it's quite likely that those few dollars are actually a result of multiple different transactions. So we really want to get it down as close as we can. Now this is a summary report, so it doesn't really break out these items like we would like to see the actual checks which are outstanding. So they have a detailed report that will break that out. It looks a little bit more confusing, but we'll take a look at it to break out those those five checks when we go through the bank reconciliation process because those are the ones that you actually want to see, to see the things that are outstanding. Now realized that the book balance will not match the bank balance if you're doing a full-service accounting system. Because when you write checks and do things like that, you know that you wrote the check, but the checks still has to clear the bank, meaning it's gotta go to the other person. The other person has to clear it to their bank. The bank has to talk to your bank. So you know, the cheque went out and you should record it at that point. But it hasn't cleared yet, it hasn't cleared the bank. Therefore, there's going to be this difference as of the same point in time between the books on your side and the books on the bank's side. It's just a timing difference. As long as you can account for that timing difference, then you can be assured that things are correct to some degree. So this is the actual bank reconciliation. What people tend to think is the bank reconciliation is the process of doing a bank reconciliation. In other words, if I go to the QuickBooks here, the bank reconciliation process will typically be going to a banking accounts and then saying reconcile. And then we'll start to enter this data. Now you don't need to enter it now we'll do this in a future presentation. But I'm just going to enter this mock data and continue. And here's the bank reconciliation screen. This reconciliation down here will show us the difference. Meaning if I check everything off, that is that is on the bank statement. If I reconcile basically with this worksheet, then this little worksheet will tell me that I'm at 0 down here, meaning that I've checked everything else that I have reconciled. And the fact that I have reconciled with this little worksheets. People tend to think that that is it once I hit Okay, I'm done. And it's true that you are done with the reconciliation process, right? This is the process of reconciling. But once you're done with this, once you're done with this process and we'll work through this process. We'll see this process. That's not this isn't the bank reconciliation. This is doing the bank reconciliation. Once you're done with this, you can then the system will create a report which is the bank reconciliation, the report being this report. So this report will be generated after we do that process. And this report will show us a reconciliation of what is on our books in terms of cash. Exactly what the difference is, outstanding checks and deposits, and then it'll tell us what is on the bank statement. So this actual statement is the bank reconciliation that will be generated from this process. So most of the time people will do this process, which is great. And then they won't look at the bank reconciliation and maybe they don't need to look at the bank reconciliation, but you basically should understand that the bank reconciliation is that report. So when you talk to somebody like an auditor or something, they want the bank reconciliation. They don't want to see that you did this process. They want to see what the result of this process being done was, which will be that report which is going to do that reconciliation, see what the Outstanding accounts were. So we'll take we'll take a look at that a little bit closer later. The other thing that people often think of, I've seen this a few times that basically people are saying that the bank reconciliation is no longer relevant due to bank feeds. So you have bank feeds. And so because you can connect directly to the bank, you don't need to reconcile at all. There's no bank reconciliation and that's not true. Because and let me just see if I can kind of explain that. Notice. You can't connect directly to the bank, right? You can, you can have, go to the bank feeds and you can get the transactions directly from the bank. But there is some confusion in terms of how you're going to apply the bank feeds. So there's a couple of different ways that you can apply the bank feeds. Note that because you're getting the transactions from the bank, if you're doing a full-service accounting system, like if you're on a fairly large company and you're in an accrual accounting system, you can't just do all your books from the bank statement, which you may be able to do for a small company. So if you want to just take the bank feats and create the books from it and a small company, then that might be something that you can do. But if you're in a larger company that does a full-service accounting system, you can't do that. So let's talk about that system first. Notice that, for example, we've seen these cycles as we go through our accounting system. If I if I have to create an invoice which is going to increase the accounts receivable and increase sales and then receive payment on that invoice and then deposits it. Then the amount that amount or transaction I get from the bank isn't going to be taking place until the deposit happens either here or here. The, the amount of information, the information we get from the bank, in other words, cannot, cannot replace the invoicing process because that's an accrual type of transaction. So just realize that when you get the information from the banking system, it's not, you're not going to be able to create the entire books. The banking system is usually there for a double-check on, on the books that you are putting together. In other words, you typically want to have the invoice, then you're going to receive the payment. You're going to record the deposits. And then you would like to go to the bank and you can use the bank fees to kinda double-check that the deposit has been that has been received. Now, you can in some cases basically replace the deposit from the bank instead of recording it in your system. So for example, in the easiest way to think about this as if you're at a small company and you want to depend entirely on the bank feeds basically to create your financial statements. So in other words, you're going to say, I'm not going to create an invoice, I'm not going to create a sales receipt. I'm just going to wait till everything clears the bank. And then I'm going to then I'm going to take that information and create my financial statements from it. If you do that, There's pros and cons to it, you can do that. But notice it's not a full accounting system because now you are no longer reconciling to the bank so much as just simply depending on the bank to create the financial statements. And again, you can't do that. But it's a little bit different than a reconciliation process. You don't have the same kind of system of I'm going to put it in to the books on my side. And then I'm going to check it to the bank to reconcile the two. That's still what you're gonna do even if you do bank, bank feeds and you have a full-service accounting system, right? You'll typically do your flow on your side, then you'll import the transactions from the bank and kind of match them so that you can double-check that that happens. Now as you do that, as you match your transactions to the banking transactions, That's similar to basically doing the reconciling process. You're basically kind of reconciling as you go. But remember this process of reconciling is a process of reconcile and that's not the bank reconciliation. So you could kind of say, well, as I do that, I'm doing this, I'm reconciling. And that's, that's kind of true. But again, that goes back to the same other kind of myth. Whereas thinking that this reconciling, the bank reconciliation know that's going to be part of the reconciling process to be able to generate the bank reconciliation being the report. So then if you do, if you depend completely on on the bank, then again, you're not reconcile and you're kind of waiting till the bank, the bank clears it. So for example, if you're on a complete cash-basis system and you're saying I'm not going to do a sales receipt or receive payment. I'm not going to use the accounts payable. I'm just going to write checks, possibly electronic checks and electronic receipts. Wait till they clear the bank and then I'm going to import that information from the bank. And I'm just going to rely on that data to create my financial statements. So in that case, you're still, you're still want a bank reconciliation, but you're not really reconciling anymore because the reconciliation, to do it properly or more of a full service system, even though on a cash basis, what you would want to do is say, Okay, when I when I make a sale, I wanted to record the receipt of cash on my books on my side. And then you would then you would tie it to the bank to bank reconciliation, to double-check. And you would be checking, that would be reconciling. If instead you say, okay, I'm going to I'm going to basically build the client and I'm not going to record the invoice. I'm just going to wait till they pay me. And even when they pay me, I'm just going to wait till it clears the bank, which since it's electronic transfer, it shouldn't take that long, right? So I'm just going to wait till it clears the bank. And then once it cleared the bank, that's when I'm going to record it. Well, that means that you're you're just waiting till it, until it clears the bank. So every transaction that you're going to download into your book will be the same exact transactions that are on the bank. That's not the case for a full-service accounting system. Even if you're, even if you're using a connection to the bank, for the bank feeds to double-check some of your transactions. That's why you really kinda gotta be careful in terms of how you're going to integrate your bank feeds into your accounting system. You got to know, am I going to be on a full cash-basis system? And not only that, but be completely dependent on the bank which you may wanna do. A smaller type of business might be able to do that if you have all electronic payments and whatnot, that might be a way to go or do I need to integrate the bank feeds into a full accounting system where I'm going to utilize accounts receivable and the accounts payable. So if you've rely entirely on the bank and then wait to wait till it clears the bank, you're still going to reconcile. And so you'll still I would still do this process, right. But when you reconcile, you're not really trying to reconcile your books to the bank because you've created your books from the transactions directly from the bank, your reliance completely on the bank. It's not like you're comparing what you did to what the bank did and seeing if there's any discrepancies between the two because what you did was completely from what came from the bank. And so what you'll still do this process. But what you're checking for is just to make sure that you downloaded all the transactions and you didn't duplicate the transactions. So when you tie out your books to the bank, that's what you're looking for it Did I get all the transactions from the bank properly? And did I did I duplicate any transactions? And that's what this will do. And then when you generate the bank reconciliation report, this will still be the process of doing the bank reconciliation. When you generate the bank reconciliation report like this, there will be no outstanding checks or deposits because because there may be really in real life outstanding checks and deposits. In other words, you might have written a check and it didn't clear until after the cutoff date because you didn't record the check. You don't know it, you're not recording that on your side. You're just waiting till it cleared. So you're just wait until it clear it. So all of your data is as of the same point in time as the bank statement because you're reliant on the bank. All your data is in there as at the bank. So you're still going to reconcile. But this report will be very, very plain because it's just going to say that the cleared balance has no reconciling items is going to equal the register balance. And so you might say, but that's only the case. That's not the case. Whenever you use bank feeds, a big company that uses bank feeds will still have to have to reconcile outstanding checks and deposits. But if you're running typically a smaller company that might be all electronic type of payments. You might be able to depend directly on the bank, still do go through the bank reconciliation process, but you will not have any of these these outstanding types of transactions. So those are the general kind of myths I just want to go into first. Next we'll go into the objectives of the first month bank reconciliation objectives and problems of the first month bank reconciliation, which is a little bit more difficult and has different problems than second, third month or continuing bank reconciliations after that point in time, then of course, we'll get into the actual bank reconciliation for the first month. 3. 9.07 Bank Reconciliation Month One Overview: Quickbooks Pro desktop 2021, bank reconciliation month 1, overview. Let's get into it with Intuit QuickBooks Pro desktop 2021. Here we are in our get great guitars homepage. We currently have the open windows open. You can open the open windows by going to the View drop-down, selecting the open windows list. We're going to review the bank reconciliation process for the first month of operations. We will do two months of bank reconciliations as we did two months of the data input. This is good because the first month of bank reconciliation is often the most challenging one. It has more challenges, more, it has unique type of challenges for that first month of bank reconciliation, the second reconciliation has different challenges, but typically it will be an easier process and will be representative of the normal process that will be going forward from that point. So if you're starting up the QuickBooks system, you're doing the first bank reconciliation and you're thinking, wow, that was more difficult than I thought it was. I do not look forward to doing that each month. Don't worry, because typically, the second month should be a whole lot easier than the first month. So let's take a look at our objective and then in the next presentation, we'll start to actually do the process of bank reconcile lean. So first of all, just remember what our end goal is, is to be tying out what's on our books to what is going to be on the bank statement. So to do that, let's going to be opened up, our reports up top. Let's go to the company and financial. Let's go to the Balance Sheet, Standard. Balance Sheet Standard. I'm going to look at the end of the first month. First. I'm going to do it in the range. So I'm going to display and go from 0, 1, 0, 1, 2, 1, 2, 0, 1, 31 to one. So the end of January is what we're looking for at this point in time. The first bank reconciliation is going to be for the end of the month of January. So I'm gonna say, okay, and so there we have it. So we have our GL balance as of the end of the month, as of the end of January. Now note that when you have online banking, I often get questions like, well, can I can check the bank anytime and I can get my balance anytime. Cannot just reconcile in real time. You don't really want to reconcile in real time, because what you want to have of those lines in time, you want to say this is the specific point in time that I want. I need to be reconciling from my book to the bank books and the bank reconciliation or the monthly statements, or the traditional way to do that in our good time intervals. To do that, if you pick some kinda random time interval and try to use a running balance system, it's difficult to do because you need to know what the starting point is, right? You can't, you'd want to know what your last starting point is. And then you want to be able to move that forward on the next starting points. So that'll become more clear. Once we do to bank reconciliations, you'll be able to see how that works. Now note this is going to be as of January 31st, 2021. So that means that you do want your bank statements, of course as well. If you have online banking, you're probably able to download the bank statements, but you may not do that regularly considering the fact that you can see the running balance and you're like, Well, I can kind of review. The running balance, I don't really need the bank statements, but again, you want them to be able to reconcile on a periodic basis, on a monthly type of basis. So note that the end of the bank statement as of December 31st, you might say, Well, wouldn't that be exactly what I have in my books if I in other words, if I recorded everything correctly, you would think that this amount in the books would tie out exactly to what is on the bank statement as of the same point in time, as of the same date. Considering this as an Asimov statement, this is a balance sheet number. Wouldn't it be the same? No, almost never. Will it be the same? Unless you are on a basically I can unless you're depending on the bank in order to create your financial statements generally, why will it not be the same? Because when we do our books, we're not doing our books being dependent on the bank. If I go if I go to the homepage, when when we write, for example, checks at the end of the month for the utility bill, for our payroll for the electric and what not? We're not we're not writing the check and waiting till it clears the bank. We're not depending on the bank to create our books, were writing the check and then we're recording it at the point in time we write the check. We're doing our own books over here, right? It just so happens that that check is a cash balance account and therefore it will come out of the checking account. And the bank will then have to do the accounting on their side as well to adjust that basically the reverse side of things on our for our checking account. So we're not dependent on the bank when we actually write the checks or when we received the deposits were if we're getting a check, if we receive a check, we're gonna put it in our system when we get the check or when we get cash, we're going to put it in our system when we group the cash together, then we're gonna go to the bank and make the deposit. We're not typically in a full-service accounting system waiting until it clears the bank before we make the deposit in the system. So that means that when we enter the information into the checking account, we know that that has already happened, even though it takes a little while, it takes a lag for it to clear the bank especially checks. Because if I give someone like a payroll check, they have to take that check. They got to deposit it. Then their bank has to talk to our bank in order to know from the banking side that it has actually cleared. So there's gonna be a lag, there's going to be a time lag, especially for checks, but even for electronic transfers of maybe a day to three days before electronic transfer goes through. So it's not going to be the same. So the process of us reconciling between the two, we'll then if we get it down to the penny completely accurate, then we know exactly what the difference is. And not only does that tell us what the difference is, what is outstanding, it also tells us basically the, you know, that all the other transactions or basically correct because I know what the difference is basically to the penny. That means that I have good confidence that all other transactions must be correct. I must be doing all the transactions correct. If I can align up everything down to basically the penny, notice that the bank reconciliation is off even by a couple of dollars. The, the level of security goes down greatly because that couple of dollars may be a result of ten different transactions, deposits, and checks. It's happened to some out to a few dollars, right? So that's that lowers the level of assurance a lot. You want to get it as accurate as possible and you should be able to basically get it down to nothing. You should be able to say exactly what the difference is, because it should be basically a timing difference and it's just a ticking and tacking off type of process to do so. So here's an example of the end result. This isn't, this is just an example of a bank reconciliation out of QuickBooks. It's not going to use the same numbers that we will be doing when we do the bank reconciliation. But the bottom line is the report will look something like this, where we have the cleared balanced. This is the balanced that's going to tie out to what will be on the bank statement. So these are the items that have cleared the bank. They have cleared the bank. And then this is going to be the book balance, the amount that will be on our balance sheet. And then they'll tell us exactly what the difference is. So if you are getting an auditor, this is what the auditor wants. So these differences to know exactly what the differences are and they can go and verify these differences if they so choose. How would you verify these differences? Well, you need the detail report because we need to know what the actual checks are. The QuickBooks detailed report looks like this. It looks a lot more kind of intimidating, but the unclear items, they are the ones that we're looking for and these are those five checks that are basically listed out. You can go to the February statement and see if they have cleared in February. And if they have, then you're just talking about a timing difference and that's what we're looking for. If it's just a timing difference, that's what we expect. And if we can tell exactly what that timing difference is, we're doing that so that we can basically have verification not only about the bank balance at this point in time or just these transactions, but all of the cash transactions and note that cash is going to be in every cycle that we, that we go through. Meaning, when we look at the Home tab, The cash is going to be part of the vendor cycle, even if we do the vendor cycle here, right? This transaction doesn't have cash, but this transaction will. So once we verify cash, we're verifying the vendor cycle to some degree, customer cycle as well. This transaction doesn't have cash involved. But this one at, well, this one's going into an deposited funds. This one of course we'll have cash involved. Therefore, when we verified cash, we're verifying to some degree the customer cycle. Obviously when we pay employees and pay the liabilities, cash is going to be involved in that cycle as well. So by reconciling cash, we're reconciling to some degree the other accounts as well, even though not completely because we're on we're doing cash, which is a cash-basis or cashflow rather than all the transactions of the books which includes a cruel and which will include non-cash transactions as well. So if we go back to the balance sheet, then our objective is to have this tie out to the, to the bank, the bank account and know exactly what the differences. So this is going to be our mock bank statement for the first month of operations. Bank statement will typically looks something like this. The format might be different, but it basically has something like this, right? It's going to say, Hey, here's the beginning balance, Here's the additions, here's the subtractions of the accounts, the increases and decreases, and here's the Indian balance as of the end of the month. And then we're going to have detail that will break out the additions and subtractions including something like deposits. So these deposits add up to the total additions. And then here's all the checks and other other withdrawals and whatnot, which are going to add up to the total subtractions that will get us to our Indian balance. So what we're gonna do in an bank reconciliation. Is we're just going to tick and tie off everything that's on the bank statement to what is in our books. Now this is the process of reconciling and there's a nice little kind of widget thing to do it in QuickBooks. I'm going to go into it. We're not going to start reconciling, but let's just take a look at the process. I'm going to go to the banking drop-down and we're gonna go to reconcile. And then I'm going to go to the checking account. We're going to say this is as of January 31st, 2021. Make sure to change this because it'll go to the like the last date that you entered because there hasn't been a reconciliation prior to that, the beginning balance should show up at 25000. But note, that's one of the problems that often will happen and we'll discuss that when you do your first bank reconciliation, that that won't be 25000 or won't match what's on the bank statement here. And then the ending balance is going to be this 1809, 335. So I'm gonna put 89, 335. I don't like to use the service charge or interest earned. I'll talk about that more when we get into the logistics of it next time. But let's go ahead and continue now again, we're not going to do the reconciliation. I just want to look at the layout of it. So here's here's our reconciliation process. This is basically the general ledger that's going to be laid out here. Now as we compare this, This is the general ledger or account or transaction detail for cash. And you can even limit it to items that are before this date. So that can limit our data so we don't see everything happening in February and what not. That can make it a lot easier. Oftentimes you might be entering data depending if you're working in an accounting firm, you might be entering data for multiple months. And so you might have it to be reconciled light like a whole year's worth of data. So it's really nice to be able to limit the data to, to some degree so that you can make the reconciliation easier. But then you're just gonna take anti off from here to what's on the bank statement. So it's going to be a nice, easy process to do, basically tick and tie off that process. Now, the problem is the problem we're going to have one problem with the first bank reconciliation is this 25000 beginning balance. You might not have that right. You might have, like if you started the bank account and you started it when you started the QuickBooks file or you started using QuickBooks and then you start entering information into the bank account. Then, then you might have a bank account that starts at 0 and that would be great. The beginning balance would be 0. You'd record the deposit into the bank and move forward from there. However, many people often have the bank account already set up and then they start their bookkeeping system even if it's a new company. So now you're gonna, you're gonna open this up, this QuickBooks up, and you're gonna say, ah, the beginning balance isn't 25000. What am I gonna do? Because that's part of the process that tick this thing off the tie everything out, this beginning balance as part of the thing you need to tie out. Well, there's a couple of ways you can deal with that. Or the other issues you can have is like what we did. We we actually took this information from a trial balance, and we took the trial balance number here, which we had to do in order to make the trial balance go into the system correctly. However, that this number here is including outstanding checks in the posits that we're going to we're going to have to deal with that. You know, from the prior accounting system. So let's think about this situation. First off, if you didn't, you didn't enter this into the opening balance and you started working forward. Now you've got data into the system. You may not want to go in and now enter it into the opening balance. So one way you can deal with this is you can actually enter it into the register just as another transaction. And so instead of it's showing up as the beginning balance here, you'll just enter it in the register as a transaction and check it off and you will still be able to reconcile. So then you just want to recognize that that's going to be the beginning transaction. So the way you would do that is you'd go into banking, use register. Then you would enter this deposit just like you normally would. And if it's a deposit that you entered in the current period, meaning it's something that that was going in there in January because we're starting in January, then you would want to record it to the proper account, possibly owner investment. If it's something that you put in prior to January and it's something that it was an ongoing business meeting. The business was growing prior to January. It shouldn't be affecting the current period and then you might want to put it in there as of December prior to the current period, and then it would it would roll over to equity basically any ways in in, in, in that case. So that's one thing, that, one thing that you can basically take care of in terms of this beginning balance if you don't have the beginning balance. Now the other problem you might have is that you enter this 25000 into your opening balance because that's what was on the trial balance. But then you look at your bank statement and you're saying, okay, that doesn't match what's on the beginning balance on the bank statement it does here, but you might run into a situation and say, I need it to do that, to reconcile, but it doesn't match what's on what's on the bank statement. And that's because of out there was unclear transactions. There was outstanding checks that were in play. When at the point in time when you started entering the data into the current system. So there's 25000 that you put in there. The trial balance is including outstanding checks and ore deposits that were in play. Now there's a couple of ways you can kind of figure this out and deal with that. Note that if you go through the process of checking off everything that's on your bank statement to what's, what's in your books as you, as you move forward. What's in your bank reconciliation, you will most likely end up with a few transactions that are on your bank statement here that are not in your books. Why? Because they were unclear transactions from the prior month in this case in December that are clearing now in the bank. They're clearing the bank in January, but you had them in the books because you actually wrote the checks in December and the prior accounting system. So once you tick and tie everything off, you'll be able to see those those items that would typically be at once at the beginning of the month that we're actually transactions that were entered in the prior time period that you are that you are seeing clear in the current time period. Now, you can do a couple of different things at that point. At this point, at one, you could say, okay, that difference basically adds up to the difference in the beginning balance. I mean, you might be able to reconcile at that point because you, this 25000 will, if you check it, will be the difference will represent the difference. However, it would probably be better to actually enter those items into the system. For example. Another, another way you can go about this is if you did bank reconciliations in the prior month, in December and you have a bank reconciliation like this. This isn't the same time period, but imagine this was a bank reconciliation for December of the prior month. You would say, Okay, these were outstanding checks. As of that point in time? They were outstanding checks we're imagining in December prior month, meaning they're clearing the bank statement this month even though we wrote them the last month. And so what you would like to do is have this information into your current system. So you could take those checks and actually enter them into, into, into them, into your accounting system. You can go into your check register, enter them into your accounting system here, and then make the adjustments to the beginning balance of the 25 thousand to cancel, cancel each other out. And that way, if you do it that way, then you can still check tick and tie off the checks that have cleared. You can see them clear and you can basically take and tie them off. And your net balance should still be the 25000 that's on your trial balance. It's just going to be represented by this opening balance transaction. And then those checks that are basically going to be netted out that that then you can check off and clear. Now as you enter those checks, you don't want to enter them. You can enter them from the bank statement here. But you do not want to enter them as of the date on the bank statement because that would be entering them in January and the current time period. You want to make sure to enter them sometime in the prior time period in December, it would be best if you had the prior bank statement to actually take these checks and use the actual date that they were written and then put them in your books as of the prior time period because that will allow them to roll into basically retained earnings. They don't they shouldn't be part of your current period income statement. You just want them in there in your beginning balance but broken out, broken out of this net 25000 if possible, so that you can actually check them off and do the process of basically reconciling by ticking and tying them off. So that's going to be one of the, those are the major kind of problems, that beginning balance kind of problem. Once that beginning balance problem is done, then the bank reconciliation is really easy because all you have to do is tick and tie off what's on the bank statement to what's on your books. And what you wanna do is always be going from the bank statement to the books. So I'm going to take the tie off. I'm going to look at the bank statement and then go to the books and see if it's on the books. So there's the 50000 and I'm going to go to the, to our books and see if the 50000 is here, check it off. Then I'm gonna go back to the bank statement and then to our books. In other words, I'm not going from the books to the bank statement. I mean, you can you can start to do that, but you always want to think about going from the bank statement to the books. You'll start to get confused when you do this, it's kinda mind numbing. You want to go from the bank statement to the books because everything on the bank statement needs to clear the books. If it's on the bank statement, it's got to clear the books because that's something that for sure happened unless the bank is wrong in error. And the bank is not usually an error that we don't usually do a bank reconciliation to catch the bank errors, although we could catch bank errors, but those are fairly rare. We're usually there to catch our errors by double checking it against the bank, which is usually correct, right? So we want to if it's on the bank and it's not on our books, and unless we can verify that it's an error, then we need to add it to our books, right? We're gonna, we're gonna have to add it unless it's wrong, right? So if it's on the bank is not in our books, will have to add like we will for these two, will not be on our books. And we'll see that. However, if it's on our books and it's not on the bank, then it may not be wrong. It's not like we did something wrong there is to, it could just be a timing difference. So we actually expect things to be on our books and not on the bank. That's why we're not going from our books to the bank. Because we're going to, we're expecting things not to be there. We're going from the bank to our books because we're trying to find everything on the bank on our books. We went once done. We will have things on our books that will not be on the bank. What will those things be? There'll be the outstanding checks and deposits. Those will be the reconciling items that when we generate a report with this, after we do this process will result in these, in these kind of items in our bank reconciliation when we actually create the bank reconciliation after doing the process of reconciling. Okay, So hopefully that made a little bit of sense here. And next time, next time we're going to go through this and we'll actually start doing a bank reconciliation. 4. 9.10 Bank Reconciliation Month #1 Deposits: Quickbooks Pro desktop 2021, the bank reconciliation, month number 1, deposits. Let's get into it with intuits, QuickBooks Desktop 2021. Then here we are in our get great guitars homepage. We have the open windows open. You can open the open windows by going to the View drop-down, selecting the open windows list. We're going to start our bank reconciliation process to do that, let's first open up our financial statements are balance sheet. We're going to go to the reports, drop-down, company and financials. We're going to go on down to the balance sheet standard. We're going to change the dates up top. We're going to use the arrange to do so. We're looking for the month of January. We will be reconciling as the first month first time we've ever reconciled. And that will be the month of January, at least in the QuickBooks system for our new data set. So were 0, 1, 0, 1, 2 1, 2, 0, 1, 3, 1, 2, 1. So January 1st to January 31st, we're concentrating, of course, on the checking accounts and we have the checking account here that we're focusing in on. And then we're going to be taking a look at our bank statement. Here is our mock bank statements and we're imagining this being the document we got from the bank summarizing our account within it. So this is not internal, it's from a third party, it's from the bank. So the bank statement will typically be a summary. We'll have a summary and then breaking out the detail that summary, having the beginning balance, additions, the subtractions, and then the ending balance where we stand in terms of the bank balance as of this point in time. Of course, that Indian date to be in the same date. We will be reconciling at four on our books, that being January 31st, then we'll have the detail of the deposits broken out and the detail of any deductions or deductions over or withdrawals or decreases to the checking account broken out in detail as well. So our goal is to match this up to the data that's in our system. So if I go back to our system note you can look at this, like this way. You can double-click on the transaction and you can start to drill down and say, Okay, here's the transactions I have. Here is check number 000 001, which is 12 thousand and so on. And you can see that there, there's a 16 and whatnot. So these should obviously match up because this is our cash account that's going to be flowing through the same information on the checking account. We entered it in on our side, and the bank is Internet in on their side when the data becomes relevant. So now we're going to reconcile the two they will not match because of those outstanding balances. To do that, I'm going to go to the bank and Dropdown. We're gonna go to the reconcile banking and reconcile. So we want to be reconciling the checking account. Of course, that's our only are only cash accounts. So we're going to use that. It's going to be as a 131 to one. So we're going to reconcile two months right after each other. We enter two months of data and now we're going to reconcile two months. That's not that unusual. I mean, that could quite well be the case when you're entering data into the system. We want to do it that way this time because we want to be comparing side-by-side the differences between the first bank reconciliation and basically all others that will be represented by the second bank reconciliation. We then have the beginning balance and note here's a problem for us, I'm going to say because this is the first bank reconciliation. And notice I adjust the bank statement a little bit to show this problem. That could happen. We, it doesn't tie out. The beginning balance doesn't tie out. That's a problem. And we're gonna say, okay, well, why, why did I enter this 25000 in there as 25000 when the last bank statement says it was as of January 1st, 30000. Why didn't I enter it into the system as 30000? Well, I couldn't do that because I took it in this case, we had a business that was starting in a prior accounting system. We're imagining, right? And we put in all the beginning balances into the system at this point. And we had 25000 in as cash. If I use anything other than 25000, I wouldn't be in balanced because that's what the trial balance said was in cash. But the bank statement says that that wasn't the case. So so what's the difference? The difference our outstanding items. Well, how do I account for that now in my first bank reconciliation, What am I gonna do about that? Well, we'll see that as we go. It'll kind of reveal itself as we check these things off and then we'll think about what to do with it. So remember that will be a problem. We're going to think about that kind of like the first deposit, something that we need to check off for kinda like the first deposit. Then the ending balance is going to be this 89335. That's being taken from our balance here, 893354, the ending balance there, then we have the service charges and interest earned. I don't like to use these typically, but some people do like to use them. These will help you to post normal kind of things to the bank. Reconciliation kind of automatically meaning you might have service charges such as this. The bank might charge you service charges like this, $15 and they just take it out of your account and you didn't know about it. So you couldn't have recorded it on your side because you didn't know about it until you've got the bank statement. So you could add that as you go. But I like to not do that because I like it kind of confuses things. I want to see it in the bank reconciliation and check it off. And I'll show you what I mean when, when we go through and do that, the same could be for interest earned and we might have some interest that we earned. And then we didn't know about it. So we obviously we didn't record it and our side of the books because we didn't know about the interest we earned until we reconciled are insolvent bank statement and saw that we had that interest earnings. Again, I don't like to do it in this format. I like to actually input it manually so that I can make sure I know what's in there. I entered it and on the check register and then I can check it off as we go. So let's continue. So here's we got, we have the basic layout here. So we have our, our period on 131. Now here's all of our data. Notice it extends beyond the 31st. Now, if we did our data into R3 properly, we shouldn't need anything entered after January 31st. January 31st, we shouldn't need any data after that because it's possible that we entered something, say on the 31st here of January and it didn't clear the bank until February, but it's not possible that something is on is on the bank and it didn't get on our books until after, after the cutoff date. Meaning it could, it couldn't have hit the banks before we've recorded it. We might have things on the bank statements such as these two items that will not be in our books and we will have to add them. But it won't be the case where the bank put something on the books and we recorded it, but we recorded it in the wrong month. Unless we made an error and we'll, and we'd have to look into that. So that means that we can basically remove anything that's after after January 31st and we should be okay. And you would do that by hitting this Hide button. So that's going to hide anything after the period date here so that it'll be it'll be a little bit easier for us to check everything off. Now these buttons down below will allow us to mark everything. Also, if I just if I knew everything was was accounted on the bank statement, I can just mark everything and do it that way. Some people like to mark everything and try to maybe unmarked the ones that aren't better. I don't think that works very well because It's kind of difficult to do it that way. So you can't really do it now if you're doing a straight, if you're taking this information like with bank feeds directly from the bank and your reliance entirely on the bank. And you're not reconciling, there's not gonna be any reconciling items because you're taking your data directly from the bank, then that this thing works great. You can just mark them all off and it should tie off exactly. And you'd be good, but otherwise, not so, not so lucky to do that. So we're going to undo that. We can unmarked all here. And then these items down below, this shows us our beginning balance. This shows us our deposits and withdrawals as we accumulate upwards. And then over here, we're talking about are our balance at this point in time. And so this is, this is the balanced, this is the cleared balance, which is only the beginning balance at this time. This is the balanced that's on the bank statement, the 1893 35, 89, 3, 35, which is here the ending balance. And this is the difference between the two. So we're starting that 25000, which is basically the beginning deposit here, except it's really 30000. Those two normally match. They don't because of our beginning bank statement problem. And then we're going to be checking everything off. And if we check everything off properly, we should get this amount to 0. These should, these two should match. And what will be left with are those things that we didn't check off over here. And the things that we didn't check off over here are going to be the outstanding items. The difference between the bank balance, which which will now be the 89335, and our balance which will include the things that were not checked off. And that's how the system will create a report from it, reconciling the bank balance and our balance. So let's start to compare this. We're going to just do that deposits this time. That deposits are usually a little bit easier to do. And that's for a couple of different reasons. If we look at the deposit side of things, normally we enter these directly no matter how we enter the deposit, right? If we go to the bank and enter the deposit, or if we do an electronic deposit of some kind, then we are going directly to the bank. It should be something that doesn't take too long to clear. So although we don't have a reference like a check number or something like that. The date is usually pretty close in range, so we can basically see it pretty clearly. Now the problems with it deposits just realized that the problems with the deposits usually lie in us having our grouping of deposits in a way that is different than is on the bank statement. And so as we went through the data input, you'll note that we emphasize that use of the deposited funds, and that's going to be the tool that you're going to use to try to match up the deposits that are going to be in the bank statement. That will be the same as your books. Problems that arise in that area. Typically have to do with credit card deposits when you're getting credit card payments, how are you going to group them in your system? How does the credit card company group them? You got to match that up somehow. If you have cash payments that you go to the bank with at the end of the day, then you've gotta make sure that you use that. And deposited funds grouping the cash deposits as cash deposits rather than just basically, every time you get a receipt of cash, you put it into the checking account. Otherwise, you're going to have to add up all the all the receipts of cash and tied out. And it's going to be a burdensome process, process on a bank reconciliation side of things. But if you've grouped everything properly, then it should, it should be really easy to tie these nice things out, for the most part. So we're always gonna go from the bank statements to our books. So because everything that's on the bank statement should be found on our books. If there's something on the bank statement that's not on our books, it could be possible the bank made an error, but that's not likely. It's more likely that it's correct and we need to fix our books. So if it's not on the bank statement, if it's on the bank statement, it's not on our books. We probably need to fix our books. If it's on our books and not on the bank statement, then we actually expect that to happen because we expect to have those under those outstanding balances, outstanding amounts. That timing difference amounts to be there on our books, but not on the bank statement. So there shouldn't be too many of them with the deposits because again, the timing is pretty close together. But on the tech side of things, you could have a fairly long time and distance. So 50000, Let's just check this off. 50000. There's the 50000 there. So I'm going to say all right there it is. Back on over, right-click. I'm going to go ahead and select this and make it. I'm going to make them green once we found them. And this is what I would actually do in practice. If you can highlight your print the thing out and use year-old highlighter and highlight the thing off. It's kind of a tedious task, but it's not too difficult a task. And then we have the 65000. And so we're gonna go to the 65000 here. So say 65 thousand there we have that and I'm going to make that green. So there is that. And then we've got the 5600. So the 5600 is going to be the 20000 500. So if we go back on over, we have the 20000 500 and that's going to be here. So we've checked those off. If I go back over, I'm going to right-click on this and make that green. Now note the dates are not going to be perfect because we would expect the dates on the bank statement to be a little bit after for the deposits, the what would be in our books. So if we go back to our books, for example, for this last one, it was deposited on our books. Who went to the bank we're imagining on the 18th. And it didn't clear the bank until the, until the 20th, that would seem kind of relevant. You wouldn't you would see a lot more consistency in that difference, that timing difference on the deposit side of things than you will on the checks that side of things. So these are usually pretty close on the CEC side of things. You could give somebody a check and they could just hold onto it for like a long time and not deposited for some time. And so you could have a much larger distinction on the CEC side of things. As you make that as you, as you make that entry or reconcile between the bank statement and and your books now on the deposits also, you don't have a lot of other stuff to go on. Usually, if you make a deposit into basically the bank with cash, then it's just going to be deposited, right? That's all you're going to be seen. However, if you have electronic deposits, if you're getting your deposits paid to you electronically, then you might have more detail on the deposit side of things. And that can help you to basically tie, tie everything out as well. On the CEC side of things, sometimes we have the check number, which makes it a little bit easier. But again, even over there, a lot of times it's electronic type of payments, but the added data with the electronic payments, such as possibly vendor information, could be useful on that side of things as well. Now, as we go back on over here, we now see that we have this one deposit that has not been checked off. Why not? Because we entered it kinda late now this is only this is on the 23rd. So you would think that it would have cleared by now. So I'm a little bit worried about that. But notice, we might assume here, of course, that it hasn't cleared in January and then it will clear in February. That's going to be our assumption. Now the fact that the dates on the 23rd, that seems like kind of a long stretch. If it is a deposit, if we're worried about that, how could we check in on that to see that it is indeed simply a timing difference. We can call the bank or we can go on to an online banking system and see if it did indeed clear after the cutoff date, if it cleared in February, no big deal. It's just a timing difference where we might want to look into why it took so long. But if include in February the money is there and it will simply be a timing difference for our for our bank reconciliation process. And that's exactly what we would expect to be happening. Now the other thing we don't have at this point, because I would kinda think of this beginning balance as basically a deposit. Notice. I'm suspecting here that this 30000 is going to match out against checks that were outstanding in the prior accounting system that we didn't enter into our system because they were checks that were entered in the prior accounting system that were entered before before the cutoff, January January 2021. And I'm assuming those are these two checks. So that 30000 minus these two checks would be the beginning balance of 25000. So I'm going to basically move forward and see if I can verify that by checking off everything else that has cleared in January. And if I don't see these two items in our book, then notice that's probably the difference, That's probably the beginning balances to 30000 minus those two checks that are accounting for it. And then I'll think about, okay, well, how can I deal with that in this first bank reconciliation process? So we'll stop here for now. We're gonna go to the CEC side of things next time. So you can go down here and say leave. You can say leave and it'll basically save your work there and then we'll continue on with it. So I'll go you can go to lunch in the middle of your bank rec and not lose the whole thing without him until you reconcile and then start working out of it again as we go forward, which will continue to do next time. 5. 9.12 Bank Reconciliation Month #1 Checks & Cash Decreases: Quickbooks Pro desktop 2021, bank reconciliation, month one, checks and cash decreases. Let's get into it with Intuit QuickBooks Pro desktop 2020 one. Here we are in our get great guitars homepage. We currently have the open windows open. You can open the open windows by going to the View drop-down, selecting the open windows, that list. We're going to continue on with our bank reconciliation, starting off by opening up our balance sheet. To do that, let's go to the reports, drop-down. Let's go to the company and financial and on down to the balance sheet standard. We're going to change the dates up top by customizing that reports from a 11 to one to a 131 to one January through through January 31st. January first through the 31st, 2021. And okay. Here's what we have. We're concentrating in on the checking account and comparing that to the bank statement. Here is the bank statement or the mock bank statement that we have. You might have this in Excel worksheet or in a PDF or you can just follow along here. Last time we have been reconciling that deposits, we're going to move on over to the checks and other decreases to cache this time. Let's go back on over to QuickBooks. Let's open up the bank reconciliation. We have been starting it in the prior presentation of you missed that one. You're gonna want to check that one out first because it's like half done right now where like in the middle of it. So we're going to go to the baking that drop-down. We're going to reconcile and we have this filled out. It should be saved now because we left it last time. And that's the nice thing about QuickBooks. You can leave it and then go back into hits him without completing the bank reconciliations and go to lunch and turn off the computer and whatnot. So we're going to say continue. And we had reconciled last time the deposit side of things. Now we're gonna move on over to the checks. Side effects. Usually the longest and most difficult kinda side to do is this side. So we're also going to be hiding the transactions. Notice the transactions in February have reappeared. We don't need to see those, so I'm going to hide them up top by selecting this item up top. Now we're going to do the same type of comparison. We're going to be going from our, our bank statement and compare it from here to the books, from here to the books. Why? Because we expect everything on our side on the bank statement, I should say on the bank side to be on our books. But everything on our books, we do not expect to be on the bank statement. So therefore, it's going to be easier for us to go to the bank from the bank statement or think of ourselves going from the bank statements to our books. And then we'll be left with some things on our books that will not be on the bank statement, those will be the reconciling items. So let's do that as we go here. So we're going to start off with these two items out that the two thousand, six hundred and two thousand four hundred, I suspect those are not going to be on our side of things because I suspect that that's part of the 30000 minus these two items beginning balance that we talked about last time. This is a problem that you may often have when you first start the bank reconciliation or do the first bank reconciliation in a new system. So in other words, that 30000 minus 5000 equals the 25000, which is going to be the beginning balance here. So it's included in that beginning balance. So I don't see those two items. In our side and we're going to have to basically deal with that. We'll talk about that at the end, but I'm going to verify that by checking everything else off. So then we're gonna go to this one. It's okay, there's check Number 1, 0, 0, 1. Now, if we have checks, like a check number, if we wrote a check numbers, that check numbers really nice as an attitude reference because we cannot rely as much on the dates. So in the deposit side of things, we can kinda rely on the dates because there'll be pretty close to when they actually clear the bank. But on the checks side of things, that's not necessarily the case. We might have written a check today. It might take a month or more than a month, you know, take clear as someone else holds onto that check and it doesn't cache it for a long period of time. Many more, many companies these days will not be writing as many checks and might be doing more electronic types of transfers paying their bills online and what not. And that is going to be similar to the deposits in that we don't have the check number, which isn't as nice, but we do have the dates should be similar or closer in range, if that is the case. And we might have some added information on the banking side of things related to the vendor to tell us who were going to pay. In other words, if I want to know who we Pig when we wrote a check to somebody I have to look at I can get the information for the canceled check and actually look at the canceled check. So to view the checkout copy of a check that was written. However, if it's an electronic transfer, they often give that in the description. So I can go to the bank and basically look up the description. And that might be easier. And if you're using bank feeds, then that information might, might be populated in your books as you go. So in any case, those are the pros and cons here. So we're going to be using the check numbers. If you write checks to check numbers are useful tool because again, the dates are not as reliable. So here's the 12000. I'm going to go back on over here and we're just gonna check these off. We're gonna say 12 thousand on our side is here. Check one 000 001. I'm going to make that green. So I'm going to say, all right, we found that was make this whole thing grain, snake the whole thing green. Check 1, 0, 0, 2, 4, 16. So now we're gonna go back on over and Sarah, 1, 0, 0, 2, 4, 16. And then I'll go back over and make that green. So I'll select the entire thing. Right-click, make it green. 100347 thousand. So there's the 7,001 000 three going back over, we're going to make it green, right-clicking on it, green, affine it. And then we've got 1 000 for, for the 20000. So there's 20000. So that looks good. Going back over, we're going to reunify that. Also note that you might have differences in terms of how your bank orders these things. They might order by bank or by date, or they might order it by cheque number. And you can kind of adjust the ordering over here. You can see if you can adjust the ordering, but you want to sell it. So I could order it basically by check number, or possibly by date or by a payee if I so choose over here. So you might want to think about how you could line up the ordering from your bank statement to your books. So then we have the 598 to 0598 zeros. So there's going to be that item. And so that looks good. So I'm going to write, I'm going to green a phi that. And then we got 1, 0, 0, 8 at the 620. So we got the 1, 0, 0, 8, c. So that one is the 108 at the 620. Okay, so notice we skipped a couple there. That's kind of normal. That's why we're going from the bank statement to our books. And then we've got the 10, ten at the 15. So 1010 at the 15. So there we have it. We got them all checked off. And so that is this one. And then we have these two items down below that we'll have to deal with. I wouldn't expect these to be on our books possibly unless we recorded them. The withdrawal we should probably have on our books, but we don't and the bank service charge. So those aren't going to be on our books over here. What is our what is on our books in January and are not on the bank statement. We're okay with that. We expect that to happen. Why? Because we're gonna say, okay, these guys must not have cashed the check yet and, or it must not have cleared our bank yet. So it's not on our bank statement in January. How can I check and verify that these things are okay. I mean, I have I paid these people then. Well, we can we can go into our bank account and check it in February. We expect to find those cleared, but not in January, but in February. So if they're cleared in February, What's the big deal? Why do this process? Because by doing this process, we can tie out our balance as of a specific point in time and reconcile it to the bank balance. Even in, by doing that, we can verify that all of that, all of our data input is correct. So we're not going to be our point here, so we're okay with these being outstanding. And we can double-check that they have clear they just cleared in February most likely. And we'll see that when we do the February bank reconciliation. And then we want those now to understand what the reconciliation is in. If we reconciled periodically, then we will be able to to verify that we have recorded everything. Now notice we're off by this 165, that 165 should be these two items, the 165. So now these two we just need to add these two items. So these are withdrawals. I'm going to assume that the that the owner took money out of the system, took a withdrawal here. And this one is going to be a bank service charge. So let's just go add that. And again, if it's on the bank and it's not in our system, then that means that we're going to basically need to adjust it. We're going to need to add it to our system, so that's what we'll do now. So I'm going to go back on over and you could you could leave but or you can keep this open. I'm just going to open the register now. So I'm gonna go to, you can go to the Lists Chart of Accounts. I'm going to double-click on the checking account, just opening up the register and I'm going to put these in both of them as of a 131 2, 1 the end of the month. I'm going to say it's not a check, so I'm going to say like other here. Now the first one is a withdrawal. If you're working with somebody like a company, if you're a bookkeeper working with a company, it's withdrawals are not good usually unless you have a good system of how you're going to deal with them. In other words, normally, you'd like to be able to say as the bookkeeper doing the work or the accountant that's put in the stuff in the books. You'd like to say, Hey, owner, whoever is taking the money out, I would assume that every thing to take out, that it's just cash that you're taken out of the business is I would like to assume that it is a pert for personal use. So you're taken up draw out of the out of the business for personal use. But if I can't Can I assume that or are you taking money out of the They account for cash and using it for business usage. And if they're using it for personal use, then I can just put it in as draws and I would want to put it in not as an expense, but instead as some kind of equity accounts, so it doesn't affect the income statement. But if it's if it's something that I used in the business, if they're saying, Hey, I took that money out and I used it in the business. Then you'd want to say, well, okay, then how am I going to know like what you used it for? Because I need to categorize it. And hopefully at that point, if they do use cash to pay business, they pull out cash out of a bank, use it to pay business expenses. They're going to have to have some system to tell you were to categorize it in. If we don't have any system to tell you what it categorize it. Then we're going to need to we're going to need to basically just put it into an expense account that will be a miscellaneous expense or other expense or assume it's office supplies or something like that as we do so, So again, what you want to do is say, Hey, look, don't, don't pay things with cash unless you have to pay things with the credit card, business credit card if you need to, or with electronic transfer or something like that, then we can do the bookkeeping and I can categorize it just basically based on the vendor name. If but when you take cash out of the out of the bank, if you're using it for personal use. Fine. I can just then I can just assume it's a draw and put it to equity. But if you're using it to spend in the business, spending cash for the business, then that's going to be difficult. We're going to have to come up with some system to tell me what it is. So for this month, I'm going to assume that it's an expense. They told me okay. It's an expense. I used it for an expense and they didn't tell me what it was for. So I'm just going to put it to miscellaneous expense and then we're going to compare that to what we'll do next month, which is we're going to treat it as a draw, which is what we would like to do, meaning it's what the owner took out for their personal use. So I'm gonna put it in like the miscellaneous expense here. So I don't, I don't really know the vendor here. So I'm going to say it's going to be for the amount of 150 was 150 and I'm going to just call it miscellaneous. I'm going to look in our chart and I say, how about is there a miscellaneous? We'll start typing it in there. Miscellaneous. Know. Yeah. I'm just going to type in miscellaneous expense. I'm going to abbreviate it so I don't misspell it. And I'm going to say tab and quickly set it up. And this will be an expense. I'm I am going to record it as an expense as opposed to draw, which we would record as as an equity type of account. So this will affect net income. I'm going to say Save and Close. And we'll record that. And then the next one, which is also other, is now going to be service charge. So I like to put this in myself, the bank service charge and it could be the bank, whatever bank we have. I won't put the vendor, but whoever the bank is, we might put that there, but I'm just going to put the service charge or the 15 and that is going to be let's see if they have a service charge, like a bank service charge. There it is. So they have that. Now again, it might be fairly small your service charges. So you may not even like you might want to include it in miscellaneous or something like that because that could be very small for for a small company might not have a lot of bank service charges hopefully. But I like to break them out even if they're small. Like to know what the bank charges to me. So I brought it into another account and I'm going to say, Okay, Let's go back into the reconciliation here. And now we have those two items. There's the 150, there's the 15. So now we're saying, oh wow, look, I reconcile. It's, it's down to 0. That means I'm good. But then we still have this issue. We're like, well, but what what happened here with this 25000? How am I going, how am I reconciled without checking these two off? These two are checked off. Here. These two these two are not checked off. Well, what happened? Well, it's really because this amount minus those two amounts is the 25000. In other words, why did we have 25000 in our trial balance? It's it's because our book balance was correct. But the bank balance had the 30000 beginning balance and then these two outstanding items that are now clearing in the, in the current time period. So we could just simply reconcile and, and write that down and note that. But we would like to actually check these two things off. So even though they were in the prior system, in other words, we entered these in the accounting system and the prior system prior to the cutoff of January 1st, 2030, one, they cleared in the current system, they cleared while we're working here. So I'd like to actually enter these into my accounting system as a prior to the cutoff. Change my adjusted balance, my beginning balance number, so that, so that it will net out to that 25 thousand. And then I can check these off. So that's what we'll do next time. I'll show you how to, how we can do that. So rather than just simply reconciling here and noting that down, that is the difference. I want I would like to actually physically check off those two items to show that they have cleared. And so we'll do that next time. So before he reconciles, so I'm gonna go ahead and leave now and we're really close, so we're going to continue on with that next time. 6. 9.13 Bank Reconciliation Opening Balance Problem: Quickbooks Pro desktop 2021, that bank reconciliation, opening balance problem. Let's get into it within two. It's QuickBooks Pro desktop 2021. Now, here we are in our get great guitars homepage. We currently have the open windows open. You can open the open windows by going to the View drop-down and the open windows that list, we're going to be taking a look at our bank reconciliation. We're going to be continuing on with the bank reconciliation, but focusing in specifically on a problem unique to the first bank reconciliation you might be doing within the system. So if you're following along, I've and you want to make sure that you've followed along with the prior presentations to go forward. If you just want to look at this particular problem and how to deal with it, then we'll be dealing with this. This is like the opening balance problem. I open it balanced doesn't tie out for the first bank reconciliation to what is on the bank statements. So let's open up some of our reports as we get started here, I'm gonna go to the reports drop-down, Company and Financial Guan down to the balance sheet standard. I'm going to be changing the dates up top. We're looking at the first month, so I'm going to change this from 0, 1, 0, 1, 2, 1, 2, 0, 1, 3, one-to-one, January through December 2021 and okay. Were concentrated in of course, on the cash. Here. We we then are going to open up our bank reconciliation, which we have started, but we ran into this problem with this opening balance issue. So we're gonna go to the banking dropped down. We're gonna go to reconcile. This is our issue here. We have this opening balance that is on our books at the 25000. And if I look at my bank statement, it's not on the bank statement is 25000, It's on the bank statement as 30000. So that's going to be our issue. Now. The question is, of course will, why there could, you could run into another problem. You might have just 0 in this account and you might have nothing there. If this is your first bank reconciliation, That's the two typical problems. So if if that's the case, why would I put the 25000 here? If the bank says it was at 30000 as of the beginning when I first started because I started on January 1st, 2021, which is the same as the end of December 31st, 2020. Why didn't I use 30000 when I when I started, why don't I use 30000 as my opening balance? Because I needed the 25000 because that's what was on my trial balance or balance sheet from my prior accounting system when I entered it into the books, meaning, I'm assuming we assumed that we had a prior accounting system and we took the balance sheet and inserted into our system as of the cut-off date, January 1st, 2000 2001. And going forward, that's what we're going to put in our system. Anything prior to that was in the prior system. And when I put it into the books, there was 25000 in cash. I had to put that there to be in balance. It That's what was on the books. So we had the 25000 in there. Notice that if you're in a situation where you just didn't enter an opening balance and you didn't have any prior accounting system. That might be a little bit easier of a thing to solve. So in any case, what do we, what do we have here? What are we gonna do with that? Well, I'm going to continue forward. We continued forward and put the ending balance here. So that's going to be the 8933589335. And I'm going to say continue. And then we basically checked every everything off that we could. I'm going to I'm going to hide the amounts that are past the date here. We checked everything off that we could. And the assumption than just, let's look at the easy problem first. Like if this was 0, if you had a 0 there, you just didn't input it and you had no real accounting data prior to this. It just didn't enter the beginning balance. Then you can enter the beginning balance instead of using the opening balance thing. If you didn't do that when you started the account, then you can go directly into the register and just simply enter a deposit. And it'll show up over here as a deposit rather than here as an opening balance. But as long as you recognize that and just check it off, then you'll still be okay because when we reconcile this opening balance is really just a deposit, right? We're reconciling this and then all the deposits. So if you didn't, if you didn't put it in the opening balance section, but you include it in the deposits section. You'll be okay. Just make sure that when you enter it as a deposit, you you classify it correctly, meaning you probably want to put it into the equity section, so you probably want to enter it into the system prior to January 1st, which is our cutoff. So in December and either put it to the equity section, assuming it was an own an owner's investment into the company. Or if you're gonna put it to something like if it was an expense or an income account. As long as you put that income account, if it doesn't belong in the current time period and the prior time period, it'll roll into equity anyways. So it probably belongs in equity. So then you can just enter the deposit, check it off, you'll be fine. If you're if you have a situation where you have the accounting system in a prior system before and you were forced to enter a beginning balance like this of a 25000, which is not the beginning balance on the bank statement, then the reason that that's going to happen is because there were outstanding checks and ore deposits from the prior system. Meaning you had checks that were written in the prior system that were included in this 25000, decreasing the balance of the 25000, which were not included in the balance on the bank statement because they had not yet cleared the bank. So there's a couple of ways that you can approach that if you have a bank reconciliation from the prior system, if you have a bank reconciliation showing you the unclear transactions, the unclear checks, then those should be the difference, you're going to say, okay, that's, that's basically the difference. And now you at least know what the difference is and you can kind of move forward. Now. The other way you can kind of think about that if you don't have access to the prior checks as we can kind of move forward and check everything else off on our system. In other words, we did the whole bank reconciliation here. And we have these two items which we didn't check off. We found everything else to reconcile. Which would make sense because these two items are things that cleared, but which we didn't we didn't include we didn't put them in the system in January in the current month. Why? Because they must have been written for us in December prior to this and now our clearing in the current month, they're not in our books at all because we started our current QuickBooks system as of January, and we hadn't entered them into the system because we entered them into the prior system and they just hadn't cleared. Right. So that means that really on the bank statement. This 30000 minus these two checks, minus these two checks is going to be our 25000. So note if if I was to just reconcile, if I checked everything off Althea and I have 25000, which is wrong, it shouldn't be 30000. And I check everything off, but I didn't check off these two because they're not there because I didn't because I enter them in the last system in December, I'm in balance. I could just simply reconcile right there. So I could I could just move forward. But then if you look at this bank rec, you're going to say, well, if something is really weird there, it doesn't make any sense because like what happened? How did you reconcile without those two checks in the house, the beginning balance wrong. What you would like to do is basically check these two checks off. I'd like to even though they were written in the prior period and thereafter before the cutoff date. I want to put them into the current period because I want to show that they cleared the bank. And if I just reconcile right now, I'm not going to show anywhere that those checks cleared the bank in my first bank rec looks really funny. So what I'd like to do is basically inter these two into the system. So what is the best way to do that is to look at the prior system and say, Let me let me see what date they were entered in as of the prior system and then and then enter them into the to the current system prior to the date. So what I'm gonna do then is I'm gonna say, I'm gonna go back over here and I'm going to enter these two checks into our system prior to the cut-off date, you know, before January. And then I'm going to adjust this beginning balance to tie out to what's on the bank statement. In other words, I'm going to I'm going to adjust this to the 30000 and then I'm going to enter these two so that the beginning balance will be back down to 25000 breaking out however the detail of it. So let's see what that would look like. I'm going to go, okay. So what I'd like to do is open the bank reconciliation. Go go to the Lists, Chart of Accounts and I'm going to go double-check the checking account. And I'm going to enter these now again, I would like to get the data from my prior accounting system for the unclear checks to get the exact data. So I'm going to basically make it up here. So I'm gonna, I'm gonna assume like 12, let's say 25 to 0 in the prior year instead of 21 the current year we're working on. And then there was no check number. So I'm going to say other. And then let's assume that this first one was going to EPA iPhone are our vendor EPA phone. So I'm going to say tab. And it was for 2600. So it didn't clear it didn't clear until January, but it was entered sometime last December, 2600. Now, when I look at it, it might I might have been purchasing inventory at that point in time, but I don't want to be putting this to inventory because that's going to be an asset's type of account. And I'm already tracking the inventory. Our I already put the inventory in on the books. Based on based on the inventory that was on that was on the books. I've already added the inventory, so I don't want to put it to an asset account. I want It's going to have to roll over basically into into the equity accounts. So you and you might want to put a MIMO there and note that when you do that, so let me just show you. I'm going to say, okay, I can't put it into inventory because I've already entered the inventory the way it should be as of the cut-off date. So I should be going into some kind of income account. If this was going to the deposited accounts, they would probably use. Uncategorized income, right? And in the memo, the memo, we might want to say this was to purchase inventory. But inventory was inventory was entered directly as of 1231 to one. So in other words, if I put it to inventory, I'm going to double, I'm going to double step the inventory because I enter the inventory already as of that point in time. So you might run into into that into that issue. So I'm going to say okay tab. So there's that one, the second one, let's just say this is a normal kind of expensive, some kind. So I'm gonna say, I'm gonna say this one. Let's say it's on the 26. I'm going to say other. Then I'm going to say this is for, let's just say Edison or something like that. A normal phone or electric bill, 2400 sky high, but I'll say 24 000. And we'll put that to the utilities again, it's going to the utilities, but it's gone to the utilities in the prior period in December, which means it's gonna go to an income statement account, any expense or income account will then rollover into equity. So it won't have any impact on the current time period yield. It'll, it'll roll out into equity. So I'm going to say tab and okay. And then if I scroll back up, notice this, this 25000, you could change that. We could change that to 30000 now, at this point, and that'll net out to basically 25000. We enter two checks then that will decrease basically kinda like the opening balance back down. But I don't really like to adjust this once it's been input and we've already adjusted the opening balance account. So I'm going to add another account and I want to basically increase the 30000, like increase the beginning balance of 30000. Notice this is just a deposit. So it's, the beginning balance is just like checking off a deposit. So I'm just going to basically add another deposit for the 5000. I'm going to be putting it to the equity account just to net these two things out. So just so I can see the detail. So in other words, I entered two decreases to checks and but and I was already in reconciled before. Now I'm going to enter the deposit which is going to net out the beginning balance to bring us back up to that 30000, while still giving us the detail of being able to check off those two checks and clear them. So I'm going to I'm going to enter a deposit. I'm going to make this as of 1231 to 0. And I'm gonna say other. And I'm going to make this deposit of 5000. And this is going to be going to the equity account. So it needs to be going to equity, it's going to roll into equity. So it's going to be in because because notice the opening balance went to went to the equity account called opening balance equity, and then we had to move it out of there to our normal equity account, which is equity. Right? So it's going to be equity if you're a company, it would be retained earnings typically. So I'm going to put it into the equity account. And this is going to be to adjust beginning balance to to the bank statement. And then I'm going to say, Hey, your post into like our retained earnings or equity type of account and paraphrasing. Do you really want to do that? I'm going to say Yes, I would like to do that. And so now if I go back to my reconciliation, you notice I wasn't balanced before, but now I can check off the detail. And so what I wanna do is say, I want to check these two off so that I can show that they cleared. So even though they were interred in the prior system, I want to say Okay, now I can basically say these two I've cleared and I probably want to note it on my bank reconciliations that, hey, these two cleared, but they were entered in the last time period and that caused us this funny thing that happened, but I want to show that they cleared in the current system. And I can check those two off. But now of course we're off by the 5000 at this point because the beginning balance is wrong. The beginning balance should be 30000, should be 30000 here. And we haven't had 25000. Instead of adjusting this beginning balance because then we would have had to change, we would have had to change that one transaction. You could have done that, but then the opening balance would have changed as well and then we'd have that opening balance issue. We just said I'm just going to enter another deposit which is going to net that out. And the deposit knitted out to the equity account, just like all of our other transactions except we took it directly to the equity account this time. And so we just said, okay, those two net out. So, so in other words, we were in balanced before, and in order to show the detail of it, we weren't balanced because these two netted out. In order to show the detail we wanted to show those two checks. So we enter those two checks, so we enter the decrease and then we had to enter the related increase over here, that deposit, which is really just the thing that trims up our opening balance to the beat, the proper opening balance to line up to what was on the beginning balance in the bank statement. And so then we can basically note that when we do our bank reconciliation, we could say, hey, the beginning balance is really there's 25000 plus the 5000. And, and that's, and we can basically show that that's how the beginning balance was structured and the trial balance when we first started this thing out. So now we can basically reconcile this thing. So now I can say, okay, now we're done. Let's go ahead and reconcile. And then we're going to see the to the reports that can be generated. So I'm going to take a look at both reports. I like to see them both, so I'm going to display the reports. And so I'm going to say, okay. So within the reports, we have the reconciliation report for the summary report and we're going to have a detailed report. Now I'm going to go into these in a bit more. So these are the two reports and a bit more detail next time. So we'll continue on and just kinda analyze these reports next time. This is the actual reconciliation. And what we did before what we just finished up, there was a process of reconciliation 18. So you kinda wanna keep in these reports are important to keep, keep a hold of. You might want to print these reports out because sometimes the system doesn't save each bank reconciliation if they can get kind of, you know, they don't save the data as, as easily as some kind of other reports. You kinda want to print these reports out and have them on hand as you as you do your bank reconciliations and we'll talk more about that next time. 7. 9.14 Bank Reconciliation Month #1 Reports: Quickbooks Pro desktop 2021, bank reconciliation, month number 1 reports. Let's get into it with intuits, QuickBooks Pro desktop 2021. Now, if we are in the get great guitars homepage, we currently have the open windows open. You can open the open windows by going to the View drop-down, selecting the open windows list. We're not going to be taking a look at the reports that were generated after we create the bank reconciliation. So to do that, let's first take a look at the reports for the balance sheet and open up our documents. So we're going to be go into the reports drop-down. We're gonna go into that company and financial down to the Balance Sheet, Standard, changing the dates up top for the first month of operations, that's going to be a 1, 0, 12, 12 at 1231, one-to-one or not, 1231 to 0, 131, 21 January 1st to the 31st of January. And then, okay, we're concentrating here, of course, on the cash. We also have our bank statement. So here's the bank statement we use to complete the bank reconciliation. And then note that we did the bank reconciliation, the process of reconciling. That was when we went to the banking dropped down and we went to reconcile and we went through this process. And then we completed the bank reconciliation last time. It's already done for January. Now we want to look at the report. So we did the process of reconciling. Now let's look at the report. Now. We generated the report last time. Once we're done with the bank rec, I highly recommend saving it right after that point because again, QuickBooks is, it's a little bit more difficult to go back to prior bank rec, so you want to basically have them on hand, print them out. So you have the hard copy of them at the point in time that you have completed them. So let's take a look at that. But you can't go back in there and and look at the reports to some degree, the prior reports. So let's go to the reports drop-down. We're going to go to the banking reports and then I want to look at the previous reconciliation. So we're looking for the previous reconciliation. So we can we're in the checking account. That's the only that's the only cash account that we have. So we're going to pick that one up. You can pick the detail or the summary. The details really the one you have to have the summaries nice to look at, but the summary data doesn't give you the detail of the actual checks that are involved. So it doesn't really give you what you need. So you could say both here and then I'm going to say display. So I'm going to display those. And notice it's gonna, it's gonna pull up a little bit differently than what we are used to. It's going to pull back up and like a PDF type of format, which is a little bit different format than we are. So this is going to be the summary reports. So we're looking at the summary report here. I'm going to zoom into it. And so notice again, it's in like a PDF type of format. Looks a little bit different than if I was to go on over here to the balance sheet report, which, which has a little bit different look and feel to it. So just realize that we're gonna go back to the summary report. Let's analyze this thing, this thing so a little bit confusing to take a look at because it does include data that would be more data than you would expect a normal bank reconciliation. In other words, this area right here from the cleared area down to here, this is basically the bank reconciliation that stuff up top. Isn't really the bank reconciliation that's kind of added information that's going to be provided here. The stuff down below, again, not really the, not really part of the bank reconciliation that stuff in the middle. That's what we're looking for. But let's read it basically from top to bottom. So notice we have the beginning balance of the 25000. Now we're going to highlight some of the issues we had with his first bank reconciliation, which are common kind of things that we have, which include the fact that that 25000 you would think would be 30000, right? It's 25000. You would think it would be 30000. Why isn't it the 30000? Because we have these issues with those outstanding checks in the prior system that cleared in the current system. And we did that basically little workaround in order to adjust that. So in the second bake reconciliation, this one will be correct and we would probably want to put a little note once we print this out on the first bank reconciliation showing that facts and hey, look that 25000 includes two checks that had cleared in the current month which had been written into the prior month, and we adjusted for that. And then we can list out the items that were adjustments for that and we can see them in the more detailed report that we'll see on the on the detailed bank reconciliation, which we'll see shortly. And then it's got the adjustments that have happened and then the cleared balance. So normally this this whole breakout is basically just a recap of what's on the bank statement which we already have. This is the bank statement now it's a little bit different for the first month, so it's kinda nice we have that information for the first month because of that issue with the beginning balance. But the ending balance gets to that 8930, 35, which is the same 8930, 35 here. So this is the bank balance. What we really want to know then is the difference between the bank balance and our balance, which is the 100,350, which is on our balance sheet. So if I look at our balance sheet over here, this is what our books say, one hundred and three hundred fifty as of January 31st, 2021. The question is, how is that different than what's on the bank statement? And I want to see exactly what that difference is, because if I know exactly what that difference is down to the penny, then I can be assured that all other transactions are basically correct because we've reconciled it as of that point in time. That's what that's what the goal is. So if I go back to the summary report, it's telling us what those differences are. There's five outstanding payments or decreases, and there's one deposit that's going to be outstanding. And that's the difference. And so it tells us exactly what that difference is. Now the problem with the summary reports is that it tells us it doesn't give us the detail. It tells us that there's five things. And what are those five things? Because I needed I went like if I'm an auditor, I wanted to know exactly which checks have not been cleared. So the fact that they just tell me it will consist of five checks isn't isn't enough detail. So that's why we need that, the detailed bank reconciliation. So if you save just one Reconciliation Summary, you'll want the detail but the summaries easier to just get an idea about. And so that's going to be the summary and then these are going to be the new transactions. And again, this isn't really part of the bank reconciliation. These are just transactions that are happening after the point after this point in time. Meaning if I was to go to the the Account here for the balance sheet and change it to the end of the year 1231 to one. We're at one hundred nine twenty four eighty eight. If I go back to the summary data, 10 nine twenty four eighty eight. So that tells us what happens after the point in time that we're concentrating in. That's not really helpful to us because we really only care as of this point in time, right? So that's, so I'm going to change the balance sheet back, back to a Wu, 131 to one. So there we have the 103, so there we have it. So that's going to be the summary report. Again, we really need the detailed report, although it's really a longer report to look at, has a lot of information that we don't really need. But it has the detail that we really do need, which is the breakout of these five checks. So now let's consider the detailed report. And so I'm going to make this a little bit larger. So we got the same kind of thing, but now it's just given us the detail. So we have the 25000, which again is basically wrong. But we can kind of mark off, like it would be nice to print this out on your first report and just basically say, Hey, look, what is why doesn't that 25 tie out really that 30000 is consisting of that 25000 and this added 5000 that we put in place, making it the 30000. So you can kinda note that in your first bank reconciliation. And why did we need to do that? Because these two items that cleared were actually written in the prior accounting system and these are the two dates that we had to add. So notice these are before the cutoff, before we started entering data into the current accounting system. And they cleared the bank in the current time period. So it cleared in the current time period. So you'll probably want to note that with your first bank reconciliation. And then once you go forward from this point in time, you won't have to deal with that. That whole problem will be gone and you'll be good to go and the bank reconciliation will be a lot easier going forward. So then we get down here to the cleared balance. So we had the cleared balanced. So once again, this ties out to the 89335, which is on the bank statement, and then we have the items that had not cleared. So here are the items listed out. So here are those five items we saw in the summary bound on the summary bank reconciliation, but now they're broken out so I can see what those actual checks are, who they were written to. And then this is what someone if you're given this to an auditor or something and this is what they're going to want to see. And if you are reviewing the bank reconciliation, this is what you want to see as well because you want to say, Hey, do I need to do anything about those items? Well, you can then go to your bank and see if they cleared in February. If they did, then they are doing what we would expect. No problem. But we want to be able to reconcile for them so that it'll, again, it'll if we know exactly what the difference is, then we can reconcile and we're confident about all of the other data. So we're not just checking in on these five things. We're checking in on all the data by reconciling exactly and knowing exactly what the difference is which verifies not only these five things, but everything. So then we're gonna go down to the, to the deposit. Here's the one deposit, the actual deposit. Now once again, this one was one that you would think would have cleared by this point. So we'd be concerned about that. I would certainly go to the bank. And say, hey, look, you know, why didn't this clear? Because I had deposited on the 23rd. If it cleared in February, great. Maybe we enter the date on the deposit a little bit wrong here or something like that. So you probably would definitely want to double-check and make sure that it cleared. But again, the fact that it's outstanding in general is not going to be unusual. And then that's gonna give us our register balance. So here's the register balance to 100,003. So once again, if you save either if you want to save only one of these two reports, save the detailed report because it gives you what you need, which are really these these items, the reconciling items. Let's go ahead and print this out. Notice it's a little bit different format to print them out. You've got the little printer item up top. And since we have the cute PDF printer, it'll, it'll make it easy for us to use that printing option, or you can choose the saving option here. So I'm gonna go ahead and print it. I'm going to save this into our folder. I'm going to use the qt PDF printer to practice doing that. So I like to go to this item. So we're going to go right here and then I'm going to say print it. It's going to ask us where do we want to put it? I'm going to select the drop-down. I'm going to go to the get great guitars. I'm going to add another folder here. So let's add a new folder. And I'm going to call it section 9. Section 9. Something happened here. Section nine and this is going to the bank rec and so the a Sean's. So there we have it. And then I'm going to go into that section. And then I'm going to call this. And again, if you might want to save it by date here. So if you're saving all your bank recs, like you might want the year first and then the month and then the day. So it'll organize itself, or you might want to save them by year in the same folder and whatnot. So I'm just gonna put in bank rec and so let's just call it bank rec. And then I'll say 0, 1, 3, 1, 2, 1. So again, if you're sorting these by date all in one huge folder, if you put the date that you are first and then, and then the month and then the day. Then that's actually a nice sorting mechanism because the system will see it in order to start to organize it that way. But again, I'm gonna put up this x and we're going to say Save. And then I'm going to save the summary report to save that one. So I'm going to go over here and just print them both out, will print this one out. And I'm going to say, Save on that. So what's printed? And so there we have it. And it's going to ask me what do I want to put it? And I'm going to say, this is going to be the bank rec, summary. This is going to be 0, 1 dot 31 D21, and then we'll save that one. So there's an outline of those two reports. Next time we'll go into the second month bank reconciliation at the end if you followed along with his first month and you're like, wow, that was painful to reconcile. It's not an easy task. Second month should be a whole lot easier. We'll go through it a whole lot faster. 8. 9.15 Bank Reconciliation Month #2 Deposits: Quickbooks Pro desktop 2021, bank reconciliation, month to deposits. Let's get into it with Intuit QuickBooks Pro desktop 2021. Then here we are in our get great guitars homepage. We currently have the open windows open. You can open the open windows backdoor into the View drop-down, selecting the open windows list. We're going to be doing the bank reconciliation for the second month of operations, having done the first bank reconciliation in prior presentations, the second month of bank reconciliations will be similar to what you can expect going forward and should be much easier than the first bank reconciliation. So it's good to have these two side-by-side, which is why they basically, we put them side-by-side. So you can see the differences in terms of the challenges for the first bank reconciliation. The second one then reflecting what should be basically that norm going forward and that norm should be an easier norm. And so we're going to first open up our reports by going to that reports drop-down. We're going to then go down to the company and financial, open up the balance sheet. So we'll open up the balance sheet. I'm going to be customizing this report. We're going to then say this is, this is going to be from 0, 1, 0, 1, 2, 1, 2, 02, 28 to one. So it's going to be Indian. We're looking at the ending date here of February, we'll say, okay. Now we're going to be reconciling as of this point. As of this point in time, we have one hundred nine twenty four eighty eight in the checking account. I also want to open the prior bank reconciliation for the first month that we put together. So let's take a look at that. I'm going to go to the reports drop-down. We're gonna go to the banking. I want to look at the previous reconciliation and I would like to see the one for the detail. Let's look at the detailed reconciliation, not the summary. Say. Okay. And it should open that detailed reconciliation. I'm going to make it a little bit larger. We're focusing on here in, So make it really big and move this over. We're focusing in on the items that did not clear because these are going to be the reconciling items. So this'll be similar to counter that beginning balance problem we saw in the first month. And you'll be able to kinda see it as we move forward, going forward here too, because these items that had not cleared in January, which we had written in January, we expect to clear in February. We had that same problem in the first month, except that with more of a problem because we hadn't entered any data prior to that point in time. We hadn't we just entered the beginning balance that was on the trial balance and our prior accounting system in the cut-off date on January 1st. And so we hadn't hadn't had these outstanding checks in our system at that point. So you'll kind of see in this going forward, they will be in there. And we can then move forward and it'll just be an easier way to move forward. So we'll talk more about that in a second. First, let's take a look at our bank statement. So here's our Excel sheet. You should have a copy of this Excel sheet or a PDF file, or you can just follow along here, that would be fine as well. So this is the second tab of the Excel sheet, so we're on the second tab for February month 2. And up top, we're going to have the beginning balance. We have a similar layout. But now of course this beginning balance will be the same as the Indian balance in the prior bank rec, and since we reconciled to that Indian balance, then we will be okay going forward with what we have thus far. So in other words, that's going to be. You know, the beginning balance, we won't have a beginning balance type of problem. So let's just review that real quick because you might say, well, that's not the beginning balance on our trial balance, which it won't be if I go to the if I go to the trial balance over here and I was to change the date to a 130 one-to-one. Then the beginning balances that 101,450. And of course that's because that's including what we have on our books that wasn't included on the bank statement. Meaning, if I go to the bank reconciliation for the prior month, the difference between the two, the beginning balance of the current statement or the ending balance of the prior statement, the 1893 35 is these outstanding checks. So these outstanding checks or that reconciling difference that we're going to be dealing with going forward. So when we're talking about the beginning balance on the bank rec that's going to be according to the bank statement that has that those timing differences, the differences that we have now reflected in the prior months bank reconciliation. So that's going to be the beginning balance. If I then go to the balance sheet, Let's change this back to the end of the second month, 02 28 to one. Now we have the ending balance, which is the 10, nine, twenty four eighty eight. That does not tie out to the ending balance here either, which is the 10468968. That's going to be because we have outstanding items down below. I mean, in our system that haven't cleared the bank statement as well in the second month. So here's basically the recap that will have beginning balance, additions, subtractions, ending balance. Then we have the detail of the deposits, the additions and subtractions, including the checks and other kinds of activities that would be reducing the balance. That gives us the detail of that breakout. So let's go back to the QuickBooks and let's open up then our bank reconciliation for month 2. By going into the banking dropped down. We're gonna go to the reconcile. And let's imagine we don't have this in here yet. This is what you would typically see. So last reconciliation, It's saying, hey, look, you've reconciled last time as of January 31st, 2020 one and so they would assume then they'll probably give you a date of two hundred twenty eight twenty one that the end of the second month, then we'll have the beginning balance, the 89 335. And that once again, will not be the beginning balance on the books. It doesn't tie out to what's on our balance sheet as of 12, 31, 21, but it's tracking the beginning balance that we've reconciled to the cleared balance on the bank and the bank reconciliation. So this should tie out, of course, to the beginning balance on the bank reconciliation, not, not on our books. And so that's the beginning balance. And then we're going to have our Indian balance here, which is going to be the one hundred four hundred six hundred eighty nine sixty eight. So one hundred and forty six eighty nine point sixty eight. Let me check that one more time. 40068900.6804689.68. Okay. If you have two screens, it's easier to do this if you have this thing side-by-side. We're not going to be entering service charges or interests here. You can. I don't like to do it here, however, I'd like to manually put it into the register and then check it off in the normal kind of process. So that's what we'll do here, is I'm going to say continue. And here is our information. So we had the period end to 28. We can hide data after the point in time that our system is reconciling as above. In this case after 228, we don't need to hear because I don't have any data after that. So it doesn't matter if you check this off or not. You'll have the same data. Our dataset. And then you could mark all I'm not gonna, I'm not gonna do that because we're gonna have to tick and tie them out so you can unmarked them all down here we have the beginning balance, so that beginning balance and once again tying out to the bank statement, beginning balance, we have the ending, the ending balance of the 10, 4, 6, 8, 9. That's on the bank statement ending balance. And then currently we have the 89 335, which is the clear to balance, which right now ties out to the beginning balance because we haven't checked anything else off yet. As we check things off, it'll change that balance. And then we have the difference down here. Once these two are the same, that means that we have found everything on the bank statement on our, our books. And therefore this difference will be 0. Everything that we have not checked off will then be the outstanding items, things that we put on our books, but have a timing difference and have not yet cleared the bank. So that's going to be our process. Let's start to go through it. We'll just do that deposits at this time. So we have then that deposits will be over here. And we're, remember as we do this, we're going to be timed from the deposits to the bank statement out. One other thing I just want to note, as we do this, note that if you go over to the bank reconciliation, we were concerned with these unclear transactions. These are the reconciling transactions. These five check had not cleared Even though we wrote them in January, had not cleared the bank by January 31st because they weren't on the bank statements. So we would expect these to clear in the current time period. So let's just check that real quick. I'd say, okay, the six, the check 1, 0, 0, 6, There's Check 1, 0, 0, 6. I'm going to make a little yellow dots just to indicate that something that was written in January but didn't clear in January, that is now clear and in February. So we have the timing difference kind of on both sides, both sides of the cutoffs between the beginning cutoff and then which is January 31st or, or, or February first, and then the Indian cutoff, which is going to be February 28. These timing differences. So here's the 500 checks, 1, 0, 0, 7. So I'm going to say, all right, there's a little yellow dot there. And then here is Verizon 1, 0, 0, 0, 9. Notice that one isn't here, so that one hasn't cleared in two months. So I'm kinda concerned about that Verizon built. Maybe that one got lost in the mail. And so we might have to double-check and say, Hey, do we need to pay Verizon because it doesn't look like that check went through. And then we've got 1, 0, 0, 1, 0, 1, 1. So here is that one. So that one has cleared. That's what we would expect. Can't make it yellow because it keeps doing funny stuff. And then we've got this 628 AT so that was written in January and it's now clearing in February. And then we also have this deposit, 26 670. So 26, 670 here, that was written in or received in January, but it didn't clear the bank until February. So it's just it's useful to note those. So because that's the time and that's the overlap, That's the timing difference on the cut off, the beginning cutoff time period date. And then we'll be left with Indian cutoff time period dates. And that'll result in back to the checking account. The items that are unchecked still the things that are still unchecked will be the cut off date at the end of the time period, which will be the reconciling items as of the end of the time period. Okay, so let's go through this. When we look at the deposits, remember that the deposit should be fairly close in date. The timing difference should be fairly close because when you make a deposit into the checking accounts, it shouldn't take very long for it to clear the bank. So you would think it would be like within three days. Also note that the major problem with deposits is with the grouping of the deposits depending on the type of industry you have. So you wanna make sure that you are depositing into your system in the same grouping as they will appear on the bank statement. Common problems happen with if you have credit card deposits, the credit card company might group your deposits in a way that doesn't line up to what your inherent in the system. And if that happens, then you're going to have to count and you pull out a calculator and figure out, try to match up the deposits and it's a mess. So you want to see if you can tie out what you put into the system to how they will be grouped as they hit the bank. One tool to do that is that an deposited funds tool also the other, she was with people have cash transactions. They might put the cash transactions into the books as they receive cash. And then it doesn't tie out to when you deposit in the bank because the bank deposit happen all in one lump sum. Again, you'll have to add up the cash transactions to the lump-sum transaction to try to reconcile and you don't want to have to do that. You want the reconciliation to be as easy as possible to do that, use the and deposited funds if you if you have one of those conditions that will take place to group that deposits in the same format in your books as you expect them to be in the bank statement. So here we have the 20s. So we're always going to be going from the bank statement, the books, because everything on the bank statement needs to be on our books. If it's on the bank statement and it's not on our books, we probably have to fix our books. Or there might be an error on the bank statement, which is not likely. That's not usually the case. Then if it's on our books and not on r and not on the bank statement, then that's what we expect to happen because those will be outstanding items. So I'm going to be going from the bank statement to the books. So here's the 26 670. Here's the 26 670 here. Looks good. Gonna go back over. I'm gonna make this green as we go. So I found that one looks good. Here's the 12. Two hundred fifty. Two hundred fifty. Looks good. So I'm going to highlight that one. Say that one is good. Here's the 2025. 2025 looks good. I'm going to make that green. And so that's it for the deposits. If I go back on over here, notice we'd haven't found this deposit and you would expect it to be in the bank statement because it was written on the 23rd, I would expect it to have cleared by the 28. So I might be a little concerned with that, but if I want to check if it has cleared, I can just go into the bank system and see if it cleared in March. If it cleared in March, that's okay. It's just a timing difference. That's what we would expect to happen. Although we might want to say, Hey, look, why did it take so long? You think it would clear a little sooner, but the fact that it cleared is good for our bank reconciliation. That's what we expect to happen. We expect things to be here and not on the bank statement. Those are going to be the unclear types of transactions. So we're going to stop here and then we're going to continue on with the other side, which is going to be the payment side of things ticking and tying that out as we go next time. So I'm going to hit the leave button. You can leave this, this kind of setup. Go, go take a break. You can log out a QuickBooks and come back into it at a later point, which is nice. So I'm going to say leave. And then you can close everything up and come back to it next time as we will do. 9. 9.20 Bank Reconciliation Month #2 Checks & Decreases: Quickbooks Pro desktop 2021, the bank reconciliation month number two, checks and decreases. Let's get into it with Intuit QuickBooks Pro desktop 2021 that who we are in our get great guitars homepage. We currently have the open windows open. You can open the open windows by going to the View drop-down, selecting the open windows, that list. We're going to be continuing on with a bank reconciliation for the second month. To do so, let's open up our balance sheet to first go into the reports drop-down, Company and Financial. We're gonna go on over to the balance sheet standard. We're going to change the date. I'll just change it up top this time to 02, 28 to one. So that's going to be our Indian cutoff date. We're looking at the reconciliation, the GL balance or our balance sheet balance being 10, nine, twenty four eighty eight, we have the bank statement that is open. We have our Excel worksheets. You can open up the Excel worksheet if you have access to it or a PDF file of it, or you can just follow along here as we go. And obviously the Indian balance here is that one hundred four hundred six hundred eighty nine, we will be reconciling the two as we do the bank reconciliation. Now, let's also open up the prior bank reconciliation for the end of January by hitting the reports drop-down, up top. We're gonna go to the banking. We're gonna take a look at the previous reconciliation. I want to just take a look at the detailed one, only the detailed one, that's the one we want. So we'll display that one. And I'm going to make this a little bit larger, so we'll make it larger here. And we were concentrating in on the unclear transactions. Too large, it's too large, too much. Okay. So we were concentrated in on these unclear transactions. These are transactions that were the reconciling items last time that our beginning reconciling items and we solve this time that these items are going to basically clear in February, even though they were written in January. That's the timing difference at the at the first at the first cutoff of our of our time period here, which is as of the end of January, January 31st or the beginning of February. February first. So those items we saw last time that we actually found them here, we've found them on the bank statement, so they had cleared except for that one check which I think was to was to Verizon were kinda concerned with that one. So we'll talk about that later. But those had cleared over here. Now, we're going to continue on and be checking off these items. In the withdrawal side of things, if a check side of things as we reconcile. So let's go into the reconciling items. In QuickBooks. We're gonna go to the banking drop-down and we're gonna go to the reconcile. We had already started the reconciliations. We already did this beginning component. If you hadn't seen that, take a look at the prior presentation and we'll go through that. So we're going to continue here. And we had checked off the deposit side of things. Now we're on the checks and other decreases side of things, which is usually the longer side of things that we have to deal with. Our basic rule is the same if it's on our bank statement, but not in our books. We probably have to fix our books. Meaning the bank statements probably correct unless the bank statement is wrong, which is not generally the case. And then we can talk to the bank and see what happened here. And then if it's on our books. But not on the bank statement, then we would assume those to be outstanding checks. So in other words, after we check everything off from the bank statement, we should be having have reconciled over here. We'll still have things on our books in here that have not been checked off. Those will be the reconciling items that QuickBooks will then use to do the bank reconciliation. So let's go through this. That means that we always want to be going from the bank statement to our books. We note that if we have checked numbers that can help us out because the dates might be more Not not as helpful for the checks. They're not going to be as close as they may be on the deposits. Especially if we have a lot of checks that we write because checks can take longer for someone to get them, deposit them and then their bank to talk to our bank and whatnot. If you have electronic transfers, then it might be a little bit closer. The dates will be more relevant to you to use. And then although you don't have checked numbers, you might have banking information that's in the system as well. So you might have the vendor information that will be there if you have those electronic transfers rather than having to go to the canceled check if I wanted to see more detail on these items. But either way, if I wanted to see more detail, I could typically go to my online banking account and look at the canceled check or if it wasn't electronic transfer to the detail related to the vendor possibly might be more than what's on the bank statement. So we want to have that handy if we can the online accounts so we could check on anything if we if we so choose as we go through a bank reconciliation. Okay, So here we go. We've got the 11,400 for the 1, 0, 0, 6. So here it is, There's the 11 thousand it was written you'll see once again in January wasn't written in February. Why didn't it clear last month? Because just didn't write it didn't clear the bank yet. They hadn't the check hadn't cleared. So they cleared this month and so that's fine. So that's good. We're gonna say that's green. Let's make that green right-clicking on it and green a file, it's green if phi the whole thing, I'm just going to gratify the whole thing. And then the next one is 500, 1, 0, 0, 7. So 1, 0, 0, 0, 7 for the 500. That's this one. Once again, it was written in January, but it cleared in February. That's fine. So we're going to say all right, that one's done. Then this one's the 10, 11, so 35, 1, 2, that's this one. So we skipped the Verizon one. Where did that one go? I don't know. We'll have to go back to that, but this one is written in January, cleared in February. So I'm going to green a phi that, so that's good. And then this one's going to be on 10, 12, 6, 28, so 1012628. So there is that one. Let's go unify it. We're going to hope reunify it. So there is that. And then we have the 1013, 1, 3, 5, 8 73. So 1013, 1, 3, 5, 8 73. What looks good. Let's create a fire that one. Then we've got the 336010151015, 33, 600. So that looks good. Griddify. And notice this has to work because we're just taking tied off along the numbers are exactly the same, which they should be, then it, then it has to work, right? And if the numbers aren't exactly the same, then there might have been a miss key in some, in some way, shape, or form. So in other words, if we wrote the check by hand and then insert it into the system, then maybe the hand check wrote that we wrote is different than what we put into the system. And that, and then again, we probably would have to depend on what's in the system and change the check that we wrote or make an adjustment for it. But if you actually write the checks from the system. Then that that won't be the case because you wrote the checks out of the system, they pretty much have to line up. So these two will be the same. So in any case, we got the 10, 14, 130058731014, Thirteen 58, 73. Let's green a phi that one gratified. We have the 10161697, 17. Here we go. 1697, 70, got that one. Unified, Griddify it. And then we have the 10178301017, 830. We could do a couple of these at the time. If we have like a good memory, it would be better if they're side-by-side, but let's do these two at the same time. 1018, 1099, 156, and 667. 1018, 1099, 156, 156, 67. No problem. Memory like a trap of steel of some kind. So then we've got down here the withdrawals that these are going to be items that are on the bank statement that are not on our books, and therefore, we're going to have to add them to our books. So if we go back to the books, then we don't have those those other two items we're going to have to add them were out of balanced by the 520. So there's the 520 that we're out of balance by. And then we have these items that haven't been checked off. So why aren't these checked off? Well, they didn't clear the bank yet. These down here, we would expect that to be the case because we wrote them out that 228 at the end of the month and we sent them out in a check. So maybe they went out in the mail and so they're not going to clear until sometime in February. So if we were then to question that and say, well, did they clear, we can check them out and we can check out February's bank statement. Go to our bank checkout February, see if they have cleared. If they have, then it's not a problem. It's just a timing difference. We're not reconciling just to find these timing differences, to check on these four checks we're reconciling and there's five checks and this one we're reconciling in order to check that everything else is basically correct as well. Because if I know exactly what the difference is, I'm not just saying I'm not just figuring out these different checks and looking into those, although I'll do that, we're looking at that'll reconcile the entire thing because we know exactly what the difference is as of a point in time. Now this check up here that I'm more concerned with because we wrote that in January to Verizon or phone company and it hasn't cleared all the way through February. That's unusual that we would expect that to clear. So now we're thinking, OK, and that check might have gotten lost in the mail. Let's talk to Verizon and make sure that weren't good standing with Verizon. I don't want to have penalties or interests or I want my phone turned off or anything like that. So that one's going to be a concern to us. So that one is something that we will follow up on. I might then check that in March. I'll look at it in March and see if it cleared in March because we would be doing this reconciliation sometime after February. Of course. If it hadn't cleared in March, then then I'm really concerned. I'm going to add it looks like that with loss, I'll call Verizon and come up with some other arrangement. All right, so then these other two we're going to have to enter. So we'll enter the withdrawal and the bank services. Now remember that withdraw if you're like a bookkeeper and you're doing the bookkeeper for somebody else, or even if you're doing your own books. But let's imagine we have this communication issue with somebody else. You know, we're doing the bookkeeping for somebody else. Say, hey, look, you've got this withdrawal, you took money out. We would like it to be that anything that's for business. You don't use cash for you. You use some means of like a credit card if you need to or, or like transfer, electronic transfer or a check. Because that gives us the vendor that we can then see who that what that vendors should be tied to as far as an account. If you just use cash, then we don't know where to put it. So we would like to say every time you draw money out as cash, that's fine. But we're assuming it's for personal use. Now if you can't do that, if you use cash in the business, then you're going to need some way to track it. The track the audit trail. You got to a copy of the receipts and keep the receipts and do that kind of thing so that we, the bookkeeper, know what it is. You're gonna have to give us a schedule of what your cash payments were that were for business. So so last time we did that, we recorded this as an expense last time. Let's do the way we would like to set it up this time and say, Okay, we're assuming we're able to assume that any money that's taken out, that's going to be cash is a draw. That's going to be a draw. And that means that he took it out or the business owner the owner took it out for personal use so we can record it to equity as opposed to an expense. So let's do that over here and then let's go to our reports now I'm going to open up the bank. The, the, the, the register. You can do that in banking, I'm gonna go to Lists and go to the chart of accounts because that's what I've been doing in the past. Double-click on the checking account and I'm going to enter the draw as of 02 28 to one. And I'm going to say this is other because it's like a draw. And you could put the owner's name in here. I'm going to skip it for now or you could put owner, let's put owner. And then I'm going to say that this was a draw, it was for the $500. Now this time I want to put it to an equity account. So if I look at the equity accounts because it was taken out by the owner, so it should not affect the income statement. It should not be a deduction. It should be something going directly to equity. Now, QuickBooks gives us a nice little thing here when we use a sole proprietorship, same draws which you can track separately. So now we have equity. Equity represents the accumulation of income over time that will rollover. So the income rolls over into the equity section. Investments, owner investments represents us putting money or the owner putting money into the company. And then we have the draws represent us taking money out of the company. So we'll kinda break those out into separate categories and be able to track them separately in the equity section, you could group them all together and just put them into equity. If you so choose. If you have a partnership, then you're going to want to make sure that you have a separate draws account for each partner. Very important. If it's a corporation of some kind, then you will have dividends in what? Now there'll be a little bit different. So you'll have the same thing, but you have to declare the dividends or it'll be dividends of some kind. Okay, so we're gonna say then we have the draws. Let's put it into the draws. And this is going to be an owner draw. So you could put a memo. I won't put one here. I'm going to say record. Also just note that when you think about these items like these expenses in these checks, you might see a situation also, it's very common where you're saying, Hey, it looks like some of these expenses that were taken out of here, our personal. So you might say, Hey, you've got an expense, go into Disneyland or something that doesn't look like a business expense. I'm assuming it's not. What should I why would I do with that if I ask the customer or if it's my books and I had an expense up here that I took out of my checking account on electronic transfer for Disneyland tickets or something like that. Then what do I do about that? Because I paid for it out of the same checking account. Well, what you're gonna do is you're gonna, you're gonna say that payment that you have, what you should have done, what would be easier to do from a bookkeeping standpoint is to take the money out as cash or transfer it to your personal checking and then pay for it from your personal checking. But it was paid for from the business account. So then when you write when you when you record the the check, the electronic transfer, whatever, what do you use to pay the tickets with the other side would once again go to a draw. So instead of taking money out, you paid for something in the checking account that was for personal use, the other side should go to draws. Now, you would rather not do that as much. You'd rather take the money out or transfer it to your personal checking account or else it's going to get confusing. You know that you're paying for personal things out of the business checking account. But if that happens, then then you basically just record it to draws instead of to an expense. So it would be just like you drew the money out and then pay for the ticket instead of paying for the ticket right out of the business checking account. Okay. So then the other side and the other one's going to be the service charge that we saw last time. So this is just standard. So this is going to be other, not a check. And now we've got the service charge. You could put the name of the bank, it was $20. In the other counts going to be the bank service charge for them charging us whatever they're charging us for, for doing the bank stuff. So I'm gonna say, okay, and then those two items, if I go back to the bank reconciliation, then if I go back to the bank reconciliation, we'll see now we have those two items should be there. If I scroll down a bit, we are here they are. Here's the 20 and the 500. So there are those two items. Now we're reconciled down below. So it says, Hey, look the indeed balanced matches the cleared balance, which is the amounts on the bank statement, right? So now we're matched out. We checked everything off. So now we all the things that are checked off tie out to the Indian balance. So that makes sense. So you might say, well, how do I know whether this ties out to our balance on the balance sheet? Our balance says 10850488. And so how do I get to that balance? And the way, the way to get to that balance is these items that are not checked off. They're not checked off and they were written or put into the system in this month in February. Those then are going to be the reconciliation items to take it from the bank balance at the end of the time period two to our balance on the general ledger. So this is the process of reconcile lean. And then once we reconcile, that will generate a report. And that report will be the reconciliation, which will then take this balance, which is now the Indian balance on the bank statement. And it'll look at these items which are the reconciling items, the unclear items to tie out and reconciled to what's on our our books, what's on the balance sheet. So I'm going to go ahead and, and, and, well, let's let's basically leave right now. I won't actually reconcile it this time because I want to look at the reports a little bit more in more detail, so everything is good at this point. I'm going to leave now and then we'll actually push the button next time and look at the reports when we, when we do that next time. So I'm going to say leave and then we'll get back to this next time. 10. 9.25 Bank Reconciliation Month #2 Report: Quickbooks Pro desktop 2021, bank reconciliation month to report. Let's get into it with Intuit QuickBooks Pro desktop 2021. And we are in our get great guitars homepage. We currently have the open windows open. You can open the open windows by going to the View drop-down select in the open windows list when we enter the bank reconciliation for the second month, last time we're going to do the finalization of the bank reconciliation and then take a look at the reports related to it to do that with open up some of our our financial statements are balance sheet by going to the reports drop-down Company and Financial, going down to the Balance Sheet, Standard, changing the dates up top from 0, 0, 1281, just one date that will have there, there's the ending balance for cash. Then we have our Excel sheet that we have been using to enter the data. This is our mock bank statements. So if you have access to this when the February tab here and or you might have a PDF file or you can just follow along here. Here is our bank statement. I'm going to go back to QuickBooks. We're going to open up the prior bank reconciliations So I can see the report for January by go into the reports drop-down. I'm going to go to the banking and I'd like to look at the previous reconciliation. I just want to look at the detailed report. This will be for the end of January. Let's see if we can display of that item. So there it is. I'm gonna, I'm gonna make it a little bit larger here, so we'll zoom in, zoom in. So there we have that. Okay, and then we left off. We're going to be reconciling now for the month of February. So let's go into the reconciliation. So we're going to go to the banking, dropped down. I'm going to reconcile. Banking reconciled. We have already entered all this data, so we've gone through the process, we're going into the final step of reconciling. Now if you haven't seen the past information, you'll want to take a look at the prior presentations. And we're going to say continue here. And we had left off reconciling everything. So we're tied out down here. We have a 0 balance down here, meaning we have done the reconciliation process, but this is not really the reconciliation, you'll recall because what this means is that the cleared balanced, the ones we have checked off, equals the Indian balance on the bank statement, which equals this balance, we don't have anything here showing us the reconciliation to the books. Meaning, how do I tie that balanced into the balance on the books. That's the reconciliation process here. So I don't say anything doing that in this, in this reconciliation screen. Now we can figure it out because, because the thing that's going to reconcile are these unchecked items. So if I was to add up the unchecked items, then that's how we can reconcile to the book. But this screen, having them unchecked is what's going to allow QuickBooks, of course, to generate the report which will then reconcile the bank balance this one hundred forty six eighty nine sixty eight by the unchecked items to the book value that we would see then on the balance sheet. So let's do that now. I'm going to, I'm going to reconcile. So we'll hit them will finally hit the blue button. And notice if you have something in here and you tried to reconcile first with this non-zero, you can't force it to reconcile. It'll say, Hey, look, you're out of balance. And you could try to force it to reconcile and it will enter and a reconciling entry for you. Really want to avoid doing that, however, because if there's any balance here, even if it's like a penny really. If it's something like a dollar or a few dollars, that seems insignificant, but it can be significant because that dollar or $2 could represent multiple different transactions. You could have like 10 deposits and five checks that add up to that dollar difference because they net each other out. So the legitimacy of the bank rec, goes down greatly if there's any variance down here in terms of the difference and you should be able to tie it out. We should be able to tie it out exactly because we can just take and tie the whole thing out. And if we should know exactly what the difference should be, because we're tying out each number as we go. Okay, So I want to look at both here. So I want to display both of them. So we'll say both. And there we have it. So I'm going to say, OK, let's just close this now. Notice, like right now it's in the format that we're used to seeing here. And it's kinda format that we're used to seeing here. But the previous bank reconciliation, this one's in more of a, a PDF type of file. So you really wanna kinda save your bank reconciliations as you go. Because if there's any change to like the prior data or or you might not have as much access to the bank reconciliation process that you want to save it statically as of this point in time, have a copy of it so that you can see where it was at that point, at that point in time. So you want to really save these as you go. So let's go back into the, into the detail first, take a look at the summary. So here's our summary bank rec. So as you'll recall that the beginning part of it isn't, isn't much youth. It's, it's even less use right now than it was in the first bank reconciliation. Where was it have some value to it, meaning that we have the beginning balance, that's the balance on the beginning balance of bank statement. And then it just mirrors what's on the bank statement. Meaning, here's the things that cleared on the bank statement. And then here's the ending balance on the bank statement, which is the 104689. So here's the one hundred four hundred sixty nine sixty eight. We already knew that because we have the bank statement, so we knew all that cleared. What we really want is this reconciling item to this reconciling item. So that's what we're looking for. And so this second reconciling item is on the, on the balance sheet. So if we go to the balance sheet, there's the reconciliation. We want to reconcile between those two items. So if I go back to the summary, then it's telling us this is exactly what the difference is. There's five outstanding items in terms of checks or decreases and there's one deposit. Now that's great, that we know that in summary, but I don't know what the actual checks or by the summary report. This isn't all that useful to me if I go back to it in the future, it's nice that it kinda recaps it in a nice small little context here. But it doesn't give me the detail I want, which is these five items and not one item. I want to know what those are. So that's what an auditor's basically going to want. So to get that, we want to go to the detailed report. So let's go to the detailed report. And so here we have the detail. Once again, It's breaks out that beginning balance. Here's everything that cleared. This is basically everything that's on the bank statement again, and this is all the stuff on the bank statement. We checked it off because we saw it on the bank statement, so it all cleared. So it's basically given us a double-check the numbers we already knew. And then again, where we want to be is this one hundred four hundred six. 689 because that's the Indian balance, one hundred four hundred six hundred eighty nine, That's the balance on the bank statement. And then we really want to know what these five items are, which they're telling us now. So here are these five items and we can see what, see what they are now this one obviously is the one we're most concerned with in and of itself because it was written in January and it still hasn't cleared all the way through February's and we'd probably want to check in on that. These three we would definitely expect to clear in March. So we would actually go into marches, transactions and check in March and see if they have cleared at that point. If they have, then that's fine. And it's just a timing difference and then we have this one deposit down here. So that's the information that we want to have this as the detail that we want to have. But remember, the reconciliation does not simply check that these outstanding items are okay by knowing to the penny or at least to the dollar, but it's close as possible to the penny should be doable. What the difference is, then we can we can be assured that everything that has been entered is entered correctly. We have our level of assurance on everything goes up greatly by being able to reconcile at a certain point in time. So that's going to be low point of the reconciliation process. So let's go ahead and save this. So now, when you first do the bank rec, you have the opportunity to to save the report in a similar fashion that we would with any other report. We have the same kind of options up top. So let's save this second one in kind of our normal routine of saving. So I'm going to go to let's do the summary report first. So I'm going to I'm going to save it as a PDF, and then I'm going to save it as Excel. And then we'll put them all into one file again as well that we've seen in prior sections. And our goal is to try to present this to somebody else, either supervisor or a client in a way that's as nice as possible. So I'm going to print this. I'm going to use the qt PDF printer as we've seen in the past, you can't use the PDF item, our option, but I like practicing this cute PDF printer. Just to use a PDF printer because I think it's useful to do so. So we're gonna say, okay, and then this is going into Section 9. So once again, you might want to if you're dating it, you might want to put the date first. If you're putting all the dates in the same area, I'm not gonna do that here, but you might want to start with like the year and then the month and then the day. So it sorts by date. But I'm just gonna say bank rec bank rec for and this is going to be the summary for O2 2828, D21. And I'll save that. And then I also want to export it to Excel. So I'm going to go export to Excel, create a new worksheet. So we're going to create a new worksheet in Excel. We will create a new workbook and a new worksheet within that workbook. So I'm going to export it. It's going to open up Excel. Now, obviously you need Excel if you're going to use this option. But this is a really nice feature to have. And then i'm, I'm gonna make this large. I'm going to do our standard formatting here. I'm going to make it, I'm going to zoom in a little bit, 0, 0, 1 of second. And then let's go to the Page Layout tab over here. And I'm gonna say, okay. And then we're going to go up to the view, up top view. And I want to go into Windows and remove the splits. So remove the splits. And then I'm gonna go back to the first tab. And I'm going to delete this tab, right-click on that tab, delete it. Okay. And this is this is going to be the summary. This summary. So bank rec summary. And then let's save this. I'm going to go to File tab up top. I'm going to save it and go to the browse button. Now we're going to put in, let's, I'm gonna go to the desktop. We want it in the get great guitars data files and Section 9. I'm just going to call it bank reconciliations. Let's just call it bank rec for O2 dot 28 dot to one. And we're going to put both both the summary and the detailed report into this one workbook. I'm going to close it back out. And now let's do the do the reconciliation detail. Now notice I didn't do some of the formatting. You might want to get rid of these items up top. I'm not gonna, I'm not gonna take away the pennies because they're important. You could put the negative numbers as brackets if you want to report, that might be useful. So you could just check it out if you went to customize up top. And you said, Okay, I want to, I want to go to the fonts and numbers perhaps, and make the parentheses around the red numbers and make them red. That could make it stand out. I want to take away the pennies here because that's going to be important. That could be important. So I'm going to say, okay, and then you could take away the timestamp by go to customize reports Header and Footer and take away that date in time. So they don't see that you're working at two in the morning or whatever. And then so there we have it. You might, you might do that adjustment. And then let's export this so or printed and export it. So I'm going to print it first and we'll print that one and see what we have there. So it's going to ask me where do I want it? I'm going to say it's in the right spot. So that's good. It's going to be the bank rec and this is the detail for 02 28 D21. So I'm going to save that and then I'll export it to Excel. So now I'm going to create a new worksheet, but it's going to be in an existing workbook this time. So we're gonna say still new worksheet and then I want to go to an existing workbook. It's probably not going to the right place right now. So I'm going to click on that and say that's not Section 8. I'm in Section 9 now weren't section nine. And then this is the one I want. So I'll pick that up. And then we'll go ahead and export. So there we have it. I'm gonna do the standard process. I'm going to move this to the right, left clicking on it and moving it to the right. And then I'm going to remove I'm going to delete the first half right-clicking on it. I don't need that stuff. I don't need that. Right-click. The late stopped giving me that thing. And then I'm going to double-click on this sheet here and then change it to the detailed report. And then we can do our standard formatting. Go into the second tab. Say, Okay, this is gonna be a little bit more difficult because you can see the splits here. So I'm going to go, all right, let's go to the view up top and let's sell Windows. And I'm going to tack this down so I don't have to keep opening it and I'm going to remove the splits. And then go back to the first page. That'll give me these little lines that tell me what the page breaks are that I'm gonna have to deal with. So we have that. And the title looks good. So, so I want to condense this to some degree if I can. So how can I do that? Well, we could go to landscape. So let's go to Page Layout and say I want to go to orientation and landscape. And then that does that do It, does it, does it. I think that does it. And then if that didn't work, you can delete some of these columns or whatnot and you can also, obviously the next step would be, I'm going to highlight F, hold down Control H, J, L. And I don't really need those and P. So you could have deleted those right-clicking on that item and then delete. So you could delete those. And if you still had a problem, this indentation system They have over here, not really necessary. I can indent in one tab. So I might take this out of column a. I'm just going to cut it there and paste it here. And then I'm going to cut this and paste it here. And if I want an indentation that I'm going to select these two items and go to the Home tab Alignment and then increase the indenting. So I don't need a whole nother column to do that, to indent. And then this one I can indent Home tab Alignment indented again. And then I just up a little bit instead of having two columns. And then I could do the same down here. I can cut this, put it over here, and then indent Home tab Alignment, indent. And in this one same thing, cut it there. I don't need those two columns, they're not necessary. And then we can indent these two if we want to Home tab Alignment, indent, and then indent and same here I can say it's not necessary. I'm going to cut that and put here Home tab Alignment indent. And then these two, I can, I can cut these and put them here. And I'm not sure if I need an a indenting, but then, then I can delete columns a through C and do that. So there we have that. So Alex, Alex, Good. So I'm going to save it. And now we get we can print this as one as one document now instead of having two. So I can go to the File tab and I can go to say I can go to Print and I want to print it using that PDF printer. I want to print the entire workbook. So I'm going to print the entire thing. And so there's the summary one, and there's the detailed information. There's no way that it looks good. Okay, so let's print it and we'll say print. And it's going to print using the QT PDF printer. And so there we go. And bank rec name looks good, so I'm going to save it. And that looks good. So then if I minimize this, what we have then is if I go into my, my data files, go into my data files for Section nine and always gonna provide this to someone. I'm gonna go to the View thing up top and make it large. We could then these have the two attachments. The bank I'm just looking at February right now. We can have attachment attachment for the February summary and the February detail or we can use the bank reconciliation for for February, the full sheet. So in other words, I can have this one PDF that could attach the entire thing. If I open up this PDF, it's going to look like this. And now we have the summary up top and then we have the detailed down below. Notice when you do the landscape thing in Excel, it's still kind of prints it this way as if it doesn't like change the whole thing to go sideways or, or, you know, a 190 degree sideways type of finance. It has it in this format, which is nice. So you can see it as a normal format. Closing this back out. The other way you could do it is you can put these two items into another folder. You might want to say, instead of having two attachments, I'm going to say vague RX. And then I'm going to take the summary bank rec, put it in there, and then I'm going to take the detailed bank rec and put that there. And then you can attach this file. If I double-click on this file, I can't I can't detach it unless I zip it. So I can right-click and zip this thing, send it to a compressed file. And then we could, we could rename it, right-click and rename it. And then bank, bank rec for, rec for O2 dot eight dot one. So then we can attach it this way. So you can attach this way, which is kinda a little, maybe a little bit nicer than having two attachments, although two attachments isn't too bad. And then we, or we can I think this is the best way to have it as to combine them in one PDF file. So that's how you basically deliver, deliver Libre boards.