Reconciliation in QuickBooks

There are a couple of ways to reconcile a bank statement in QuickBooks. One is not necessarily better than the other. It is more a matter of what works best for you. One is to use the Reconcile feature in the software and the other is to mark individual transactions as cleared directly within a register. Before going through the steps of using each method, let’s discuss two stages of clearing entries.

Marking Entries with an Asterisk

There are two stages for clearing transactions when you reconcile a bank statement in QuickBooks. The first is by leaving an asterisk next to each individual transaction in the register. This is a temporary reconciliation done before the statement is received and does not affect beginning and ending balances in the reconcile window.

This option is great for keeping your register up to date during the month. I do this for my larger clients because it helps me keep current with transactions as they clear the bank and help my clients keep a eye on their cash flow and what is currently in the bank. Keeping things current in this manner also helps to catch problems early.

I was updating a client’s checking account in QuickBooks by viewing current information from online banking and discovered a transaction with an airline company. I knew that my client had no plans to travel and alerted her early in the workday to contact her bank as it was obviously fraud. This is one example of why it can be good to perform temporary reconciliations during the month.

You can mark entries with an asterisk from directly within the account register or from within the reconcile window. If you choose to mark them from the reconcile window, you must remember to choose ‘Leave’ and not ‘Reconcile Now’. Once you leave, you can open the register and see an asterisk next to each transaction you marked.

Marking Entries with a Check Mark

After the end of each month when you perform a bank reconciliation with the statement, you will change the asterisks to the second and final stage which is a check mark. You will change this either from within the register or the reconcile window, depending on how you do your reconciliations.

Reconciling Your Bank Statement

Reconciling Directly Within an Account Register

If you choose to reconcile directly in a register, you will not be able to switch to using the reconcile window in the future because the beginning balance will always be wrong. I do not recommend this method.  To mark a transaction as cleared against your statement, locate it in your bank account register in QuickBooks and put a check mark next to it with your mouse in the column between the Payment and Deposit columns and press enter on your keyboard.

In order to be sure the ending balance in your register matches that of your statement, you will need to sort your entries by cleared status. You can do this by choosing it from the drop down box at the bottom of the register window where it says ‘Sort by’. The balance of the account at the last check mark should be the same as the ending balance of the statement.

Using the Begin Reconcile Window

I personally prefer to use the Reconcile window. It is laid out in a way that makes it easier to see all the uncleared transactions and mark them as cleared. To use the reconcile window, choose ‘Banking’ from the drop down menu items and from there choose ‘Reconcile’. Before you arrive at the reconcile window you will be presented with the ‘Begin Reconciliation’ window.

The Begin Reconciliation window is where you will choose which account you want to reconcile a bank statement in QuickBooks for, as well as entering the ending balance and date of the statement you are working with. Here you can also enter bank service charges and interest if you have not already done so in your account register. This is a nice feature for those who don’t use online banking and don’t know what the service charges or interest are until they receive their statement in the mail.

If you choose to enter a Service Charge or Interest Earned, you will need to choose the correct account from your chart of accounts to associate them with. This is done from the drop down box under the heading ‘Account’. Once you have completed these entries in the Begin Reconciliation window, you can choose ‘Continue’ to proceed to the Reconcile window.

Using the Reconcile Window

On the left you will see ‘Checks and Payments’ and on the right you will see ‘Deposits and Other Credits’. An option that appears near the top of the window is to hide transactions after the statement’s end date. This is useful if you are behind on your reconciliations and only want to see the transactions associated with the ending date of your statement.

Sometimes while reconciling a bank statement, you might see an entry you don’t recognize. If you want to see the details of that particular transaction, you can either double click on it to open the original entry or you can highlight it and choose ‘Go To’ from under the transaction lists.

To make things go faster, you can choose to ‘Mark All’ transactions that are in both lists. You might do this is you are sure your entries are correct and that you have very few items that are not on your statement. This way, you would only have to ‘Unmark’ some. I do this for one of my smaller clients because I make entries into QuickBooks directly from their statement. In this case, I know that everything is there and I can reconcile very quickly.

When I reconcile a bank statement in QuickBooks for all of my other clients, and my own books, I find it better to start by unmarking all transactions and going over my statements one item at a time. It works best for me if I mark items on the statement with a pen or pencil as I check them off in QuickBooks. This helps me to know where I left off in case of a distraction while reconciling.

If at any time during your reconciliation, you think you might have entered your ending balance or other information wrong in the ‘Begin Reconcile’ window, you can return to it from within the ‘Reconcile’ window by choosing ‘Modify’.

Completing Your Reconciliation

When you are done reconciling and the cleared difference is zero in the bottom right corner of the window, you can choose ‘Reconcile Now’. At this point you are presented with the option to print the reconciliation reports. I recommend that you do this so it will be easier in the future to locate errors in your reconciliation.

Correcting a Previous Reconciliation

If you find that something has been changed since your last reconciliation that changed your beginning balance for your current reconciliation, you can choose to ‘Undo Last Reconciliation’ from the Begin Reconciliation window. You can also do this if the last reconciliation was done incorrectly.

Occasionally, I have had to delete an item in QuickBooks that was part of a previous reconciliation because it was originally entered incorrectly. The amount was correct, but I might have needed to change a deposit to show the correct customer or job. Of course when I do this, the ending balance gets changed and creates a problem in reconciling the next statement.

In this situation, I can safely recreate the entry. If I do my reconciliations from directly within the register in QuickBooks, all I have to do is put a check mark by the new entry and my balance should be correct. If I use the reconcile window to do my reconciliations, it is not so simple.

What I do after entering the new transaction is to go the Begin Reconcile window. I choose the account to reconcile, and for the ending balance, I enter the ending balance of the last statement that was reconciled in QuickBooks. So if I changed a transaction from February, but I had previously reconciled the account through the end of March, I will enter the ending balance from the statement ending March 31. Once that is done, I proceed to the reconcile window. Here, I locate the new entry and put a check mark next to it. My cleared difference should be zero. I choose ‘Reconcile Now’ and I am done.