QuickBooks Online 2021 bank reconciliation month one or in other words, the first bank reconciliation within our QuickBooks system now focusing in on checks and other decreases to the checking account, let’s get into it within two, it’s QuickBooks Online 2021. Here we are in our geekery guitars practice problem, we’re going to be continuing on with our bank reconciliation.
First step, opening up our balance sheet, we’re going to duplicate the tab to do so going up top, we’re going to be right clicking on the tab up top and duplicating that tab. And then we’re going to go down to the reports on the left hand side. So here we are there. And then we’re gonna be opening up the good old balance sheet, our favorite report, the balance sheet report, reigns, changing that up top Indian at the a 131 to one, then running that report. closing up the hamburger scrolling up with the control down a little bit, just so we can take a look at the checking account.
We’re reconciling This is on our books for the checking account as of December 31 2021. Of course, we are comparing that to what is on the bank statement, which this is our mock bank statement. This is our ending balance at this point in time, we then are just ticking and tying everything off for our bank reconciliation process we have done so thus far. Looking at the deposit side of things.
Now we’re going to be continuing on with the checks and withdrawals types of things or decreases to the checking account, this is typically going to be the time where it’s going to be a little bit longer of a process to go through these items. Because usually there’s more kind of checks that we write or decreases to the checking account. Then on the deposit thing side, oftentimes, let’s go ahead and open up our bank reconciliation process over here. So we’re going to go back on over go to the first tab. And then I’m going to hold Ctrl scroll down just a bit getting back to that 100%. So it doesn’t do anything funny on us.
And then we’re going to go down to the accounting tab down below, we’re going to go to reconcile up above. And we’ve been working rather leisurely in our bank reconciliation had started it before. And now we’re going to be resuming the process. resuming the process closing up the hamburger up top, so we have a little bit more space to be working in on, I’m going to try to scroll in just a little bit, I’m at 125% holding down control scrolling up to do so gonna close this stuff out because it’s in my way, and I don’t need it.
And then I’m going to go up top, we’ve been entering the bank the deposits last time. So this is what we have thus far, we did so by going down here and going and focusing in on the deposits now we’re going to be focusing in on the payments. So I’ll go to the payment side of things. Once again, our process is I’m going to hold CTRL and scroll down just a bit. Our process is to be tying from the bank statement over to the books. So this is going to be what we have in our books side of things.
This of course, the bank statement, what we have on the bank statement side of things. Remember, our objective here is to be going from the bank statements to the books, anything that’s on the bank statement, we would expect them to have be on our books. If it’s not, then we probably have to fix it. If it’s on the bank statement not on our books, then we’re probably gonna have to add something to our books unless the bank is wrong, which can happen.
But if not usually what happens if on the other hand, it’s on our books, and not on the bank statement, then it’s quite likely that we have an outstanding item, meaning we know about it, because we wrote it or we entered the transaction bank does not know about it, because it now has not yet cleared the bank. As of that point in time, those then will be our reconciling items. Also note that when we’re talking about the decreases, if we actually physically write checks, which used to be that we wrote a lot more checks going on, then we’d have the check number to kind of help us out.
And that could line up as well as the amount that would help us to line up the date would not be as useful. Because it can take a long time for a physical check that you write enter into the system, which we recorded when we write the check to then clear the bank, which would then take the check go into somebody else, the other person depositing it in their bank and then talking to our bank, it would take a long time for that to happen.
So the bank, the date, then not as useful check number could be quite useful to help us to double check. And of course, the amount, then would be useful. If we have electronic transfers, then meaning we make electronic payments, then you’re not going to have the check number, but the amount will still be useful. And in those cases, the date will be much more useful as well. So many times in these days, the electronic transfers are going to be more common.
And the date will be more relevant in those cases when you’re trying to do your bank reconciliation process. And you might have information such as like the description or bank information that comes in to the as you go through those electronic processes, which could help you to identify a vendor and things like that, which can help you to kind of tie out the information and give you a little bit more information to do so as well. So let’s go ahead and just tick and tie this stuff off.
So same process, we’re going to go back on over and say all right, let’s go from the bank. We’re going to go here, that 2006 and that 2004 I’m going to start off looking for those I’m going to say hey, I don’t I don’t see those. I don’t see those two items here. They should should be there. Why aren’t they there? Because these probably were outstanding items last time on the December item, meaning we wrote them in December last month, but they didn’t clear until this month. But they’re not in our books at all as cleared or not cleared, because we started entering the data as of this month, the beginning of this month.
So they were outstanding as of our prior accounting system. So these two items, we’re going to say I identify those as the problem. That’s the difference. That’s why this was 35,000, on the beginning balance, and in our beginning balance, we’ve entered, it was only 25. That’s our $5,000 difference, I’m going to say, Ah, well, I see what that is. But I’m not going to deal with that. Now we’ll deal with that. That’s our beginning balance problem. We’ll talk about next time, but we see where that’s coming from, then I’m going to go to this 12,000, I’m going to do what I can right now, I know what I could do with that 12,000.
So there’s the 12,000 gonna check that one off. And then I’m going to highlight that we’re going to yellow phi it yellow phi, that one, there’s the 16,000, they’re going back on over, there’s the 16,000 here looks good. That’s yellow five out one gonna go ahead and yellow phi that one, there’s 7000 here. And we have a check number that we could check off there. That’s check number 1003. And the check number here is 1003. So we’ve got that added kind of check, notice that the dates may not line up, this might not be a perfect problem for the dates.
But notice the dates may not be the most useful thing, once again, with the checks with electronic payments they may be then we got the 20,000. The 20,000 should be over here. Notice this cleared on 114 on the bank. And over here, I’m sorry, it went into our books on the 114. Date, it cleared the bank on 120. That’s always going to be the case the bank will always be later these dates on the bank statement don’t match when we actually wrote the check.
Those are when the checks cleared what’s on our books, if we did our books in real time and didn’t depend on the bank to do them. When we wrote the check. In other words, we put them in our books not when they cleared, then when our books, the date will be earlier than when they cleared the bank. So 20,000 we’re going to yellow file that one. And then we got the 59805980 checking that off right there looks good. And yellow fi yellow fi 624 check number 106. So there’s the 624 check number 106 looks good, yellow five, yellow five, indicating that that one has been completed, and then the 15,000 for check number 107. So 15,000, check number 107.
And then yellow phi. So that looks good. Now these two down below, we may not have because this one, we’re saying it’s a cash withdrawal, which we should have put in our books. But if we go over here, we’re gonna say I don’t see the withdrawal happening, we’re gonna assume that like the owner just took money out if it’s a sole proprietorship, cash was taken out of the checking account. And then this one, bank charges that one is almost never on our books, because we didn’t know about the bank charges until we got the bank statement.
And then they told us that they took some of our money out of our checking account to pay for their services. So we’re like, okay, unless we’re gonna argue with those items, and we’re gonna have to add them to our books. So how do we fix these two items? Well, they’re not errors on the bank statement. And if they’re on the bank statement, and they’re not on our books, and the bank didn’t make an error, which they usually don’t, then we’re gonna have to add them on our books. So I’m going to go in and add these then on our books here.
So I’m going to go back on over. Now I could do this on a separate tab, or maybe I just want to leave, I’d rather save this and leave this. And then I’ll enter this in the check register. So I’m going to say Save and save for later. And then let’s open up our hamburger. And then I’m just going to enter these right into the check register. I’m just gonna go down into there, I got to do some reconciling things here.
Let’s go to the accounting tab, which we’re already in Chart of Accounts up top, let’s open up the register for the checking account. Close up the hamburger. So we have some more room to be dealing with this stuff, hit the drop down, we’re going to need some decreases to the checking account for these two items to withdraw. And then the other. The other item there are bank service charges, I’m going to make them expense forms because there’s not a check number related to them. I’ll put them in as of the end of the month, which is 131.
And we’ll start off with the miscellaneous item. Now the miscellaneous item is going to be a problem if you’re a bookkeeper, it’s kind of an issue. If you’re if you’re if it’s your company, then you kind of have an idea possibly of what that was for if you’re a bookkeeper and the person you’re doing books for just keeps pulling money out, then you’re going to want to have a system for it. You’re going to basically say okay, what should happen is when you take money out of the out of the business, then you should hopefully be spending that money on personal use and I can then determine that every time you take money out, it’s a draw,
I would like to be able to say it’s a draw, because when it clears the bank statement, I don’t have any other information. So if it’s a, if it’s an expense that you that you are spending money on for the business, and it’s something that you want to deduct for your taxes and whatnot, you want an audit trail to be happening there, which means you want to be taking that you spending that money with a cheque, or with a, with an electronic transfer or some kind with a credit card. So we can see who the vendor is who you paid.
Obviously, if you take cash out of the company, and then pay for something that’s business related, we can’t see it as easily, we don’t have as good an audit trail. So and you could still deduct it, but then you would need receipts and whatnot to really verify you need more information, typically, to verify cash payments, for business expenses. So we would like to say, hey, look, I mean, if you want to deduct this thing, if it’s going to be an expense, something you’re going to deduct on your taxes, most likely, then don’t pay it with cash, because then you don’t have an audit trail of it as easily, we have to do more work on that pay for it with a check, pay for it with an electronic transfer pay for it with a credit card.
Anytime you draw money out, we would like to assume that that was because you used it for personal use. And therefore I can categorize the draw as basically a draw, rather than an expense. But sometimes people draw money out and they spend it on on the business too. And if that happens, then we got to determine what expense that should go to when you know what account should it be going to because I can’t tell from you know, the bank statement. So that we’re gonna have to ask and determine what expense it should then go to. So let’s, this time, we’re going to be allocating it to an expense account.
And then next time, we’ll treat it as a draw. So let’s take a look at what that will look like. I’m going to go back on over, we’re gonna say that we asked about that 150 that was drawn out for cash, was it used for business or not? If it was used for business, then I’m going to say that it’s business expense, 150 payment, and then we’re going to ask, Well, what was it for, and if it was just miscellaneous, we used it for miscellaneous business expense, then we’re going to put it to miscellaneous for the side, which is not very descriptive.
We’d like to have something you know, you know, better than that, then miscellaneous. It’s not not very descriptive account. But there it is, we’re gonna say it’s a business expense that will then fall on the income statement. So if I save and close that, there we have that item, if I go back up top, right click on the tab up top, duplicate that tab and just take a look, of course, what’s going to happen on the income statement, the profit and loss report, going down to the reports on the left hand side, opening up the A P and L, the income statement range change up top ending at Oh 131 to one running that report, closing up the burger, scrolling up just a bit.
And then we see that down here and miscellaneous now we got that 150. So it’s on the income statement, meaning it’s decreasing the the net income, which for taxes would be like a deduction. So if I go into the balance sheet, note that if we were to classify it as a draw, meaning it was taken out for personal use and not business use, then we want to make sure that we put it in an equity account down here something in the equity type of account, so that it doesn’t hit the income statement, because it’s it’s something that was taken out of the business for personal use, and should not then be a deduction or an expense on the income statement.
So we’ll see that next time with our second month bank reconciliation, where we will then treat it as a draw, which would be the standard way we would like to treat it. And then we have the bank service charge, this is kind of stick. So we’re gonna say this is going to be a payment of 1515. We could put the bank as the payee, but I’m just gonna put the amount here and then the service charge, you could put this, you know, somewhere somewhere in like miscellaneous, it should be a fairly small amount, but I like to break it out.
And QuickBooks did give us an account called bank charges. So it’s nice to have that break breaking out broken out. I like to know how much the bank is charging me even though it’s usually hopefully, fairly small. So I’m going to go ahead and save that. So now we got those two items that have been posted. Let’s go back to our bank rec then instance, continue on with our reconciliation. So I’m going to go down to the accounting down below, go to the reconcile tab.
And then I’m going to close the burger. And now we can resume we’re going to resume the reconciliation, the reckoning of the filiation. And then I’m going to I’m going to look at the payments now payment side of things. Scrolling down, and we then see we got these two that I can check off. There’s the 15 there’s the 150. And those two have been checked off because we found them. And then let’s yellow fi over here. So now we found everything except for these two items. And we had that issue with the 30,000 beginning balance only being 25,000 on our side.
Now if I go back on over, it’s like, hey, look, I’m in balance right now. I’m in balance and we are at this point we’re in we’re in balance, but we still got kind of an issue. It’s like I don’t really get it. Because I put in, you know, this beginning balance, and we checked off to account for that beginning balance, I’m going to go back to all transactions, the 25,000 for the deposit, right, and that didn’t tie out to the 30,000. And then I still have these items on my bank statement that I didn’t check off at all. So those, those two things that don’t seem right kind of cancel each other out.
And we reconcile so we could kind of stop there and go forward. But it doesn’t seem quite right. You know, I’d kind of like to be able to check these two things off to recognize the fact that I wrote them last month, and they cleared this month and then deal with this issue where I have 30,000, in the beginning balance here, and on our books, we had the 25,000 that we started with. So it’s not really the best way to start off by by just going forward from here, you can kind of note that down, you can write it down, and go forward from that point.
But we’ll talk more about how to deal with it next in the next presentation, so we’re not going to finish it up this time, we’re going to deal with that beginning balance issue in in the next presentation. Also note that now we have these items that are outstanding down below. So if I look at the payment side of things, we have all these items, this one, and these these all these decreases that we wrote, we wrote these in January, and we didn’t they’re not reconciled.
Does that mean they’re wrong? Are we wrong in that case? Not necessarily, because they’re on our books, but they’re not on the bank statements. That means that there could be a timing issue and most likely are a timing issue. Right? That means that we wrote them we know about them, we know that there’s a decrease of the checking account, but the bank does not yet know, because it has not yet cleared the bank.
If we have a question about any of these items, then we can check it because when we do the bank reconciliation for the month, end of January, for example, it will actually be sometime in February, we can go online to the banking system and see if those things have cleared in February. If they have, then we’re okay. We’re saying okay, they cleared the bank. There’s nothing wrong here. It’s just a timing difference.
And these timing differences then will show up in the bank reconciliation report, which will be the difference between the bank statement if I go to the balance sheet, and what’s on our books, our books here, bank statement here, the difference between those two numbers will be those timing difference, those outstanding items. And if I can tie those out to the penny, which I have here, except that we have that kind of funny issue, I have tied it out to the penny.
That means that every other number looks correct has been double verified, is something that we did on our side of the books and has been cleared on the bank side of the books. Therefore we have verified and double checked everything, not just look for those outstanding items. But by determining what the outstanding items are. We’ve put a double verification on all cash items.
And by double verifying cash, the lifeblood of the company, we’ve have a double check or an internal control on all the cycles within the accounting cycle. So we’ll continue on next time with this kind of beginning balance issue. And we’ll deal with that for now. We’re going to go ahead and leave this I’m not going to finish right now. I’m just going to save it for later. We’re not quite done saving it for later. More coffee. We’ll be back