Reconciling in QuickBooks®
The day-to-day operations of a business vary from interactions with vendors and customers, management efforts and decision-making, and employee compensation, among others. Though different in function and purpose, these varying facets often share a distinct similarity: effects to the accounting records through cash transactions. The dual-process approach of entering transactions, both cash and non-cash, into QuickBooks® and then matching these transactions to the business’s banking institution reconciles the completion of these transactions, thereby ensuring the accuracy of the accounting records. Regular quarterly, monthly or even weekly reconciliations of a business’s cash accounts (savings, checking, investments etc.) is a regular function of good accounting practices, allowing management the ability to accurately interpret the financial reports and mediate outstanding items or discrepancies for the benefit of the company.
How Does Reconciling Work in QuickBooks®?
QuickBooks® compiles the transactions applicable to the account and date range chosen for reconciliation in the Reconciliation screen. After navigating from the main toolbar (Banking > Reconcile), the Begin Reconciliation screen appears, asking for basic information regarding the statement to be reconciled; the account, statement ending date, ending balance, and any applicable service charges and interest earned must be entered prior to continuing to the Reconcile screen.
(Note: the Beginning Balance information appearing in the Begin Reconciliation screen is populated from the ending balance of the last reconciliation. If the account has never been reconciled, this amount will show either the beginning balance entered when the account was created or a zero balance, the latter indicating that no transactions have been cleared through the account.)
After continuing from the Begin Reconciliation screen, QuickBooks® navigates to the Reconcile screen, populating two columnar categories: Checks and Payments, and Deposits and Other Credits. Whether simply matching the transactions within QuickBooks® or manually entering the transactions from the bank statement, the process is the same: as a transaction is verified to have cleared the bank (via the bank statement document provided from the institution on a quarterly or monthly basis), the line item should be checked, adding to the cleared balance for the designated time period. Often, banking institutions provide the total Debits and Credits (designating the two types of transactions in the Reconcile screen, separated by columns) for the time period, further adding to the accuracy of the reconciliation process by matching the provided total with the total generated by QuickBooks® in the lower left corner of the Reconcile screen.
An account is successfully reconciled when the Ending Balance and Cleared Balance equal each other, and the Difference is zero (from the lower right corner of the Reconcile screen), even if transactions remain appearing in either one of the columns unreconciled to the bank account. Choosing Reconcile Now navigates the user to choose a reconciliation report to save with their records; alternatively, if the reconciliation process is unfinished but will be returned to at a later time, QuickBooks® users can choose the Leave button, which saves their reconciliation work up the point of navigating from the screen.