Bank Reconciliation

1. Bank Reconciliation

2. Bank Reconciliation • Process of balancing your check book • Compare your bank statement to your records in QuickBooks to ensure that bank shows what you have in your accounts • Must be done every month for each bank account • Any discrepancies must be identified and corrected • You have one chance to complete this process, once you click Reconcile Now button, you will not see the same screen again (so be careful, do not click Reconcile Now button unless you meet the reconciliation criteria, click Leave button and go back to it later)

3. Method of Reconciliation • Open the checking account • Select Banking/ Reconcile • Begin Reconciliation screen will appear • Check Beginning balance, should match the bank statement • Enter Ending Balance, and any Service charge or Interest Earned from the Bank Statement • Click Continue

4. Begin Reconciliation Screen

5. Method of Reconciliation (contd.) • Reconcile Account screen will appear • Two columns, one for Checks, Payments etc. other for Deposits, Interest, Other Credits • Match Deposits on the screen with the deposits on the Bank Statement • Match Checks and other debits on the screen with the Bank Statement • As you are selecting items on this screen, QuickBooks calculates the sum of the marked items and the Difference field

6. Totals should match bank Statement This field should be zero

7. Method of Reconciliation (contd.) • After you have clicked off each deposit and check, look at the Difference field at the bottom, it should be “0.00” indicating your bank account is reconciled • Also verify that Check/Other Debits total matches with the bank, as well as the Total Deposits/ Other Credits total

8. Criteria For Reconciliation • Difference field at the bottom of the screen is “0.00”, showing that the your ending balance is the same as that in the bank • Total Checks/ Other Debits/ Payments matches the total on the bank statement • Total Deposits/ Other Credits/ Interest matches the total on the bank statement • If all this is right, click Reconcile Now button to complete the process • Reconciliation Report screen will be displayed

9. Problems During Reconcile • If you are unable to meet the reconciliation criteria, click Leave button to put the process on hold • Research and fix the problems and then start the process again • Banking/ Reconcile • Enter the Ending Balance, Service Charge and Interest Earned again • All the items that you selected earlier will show up as selected • Fix problems, and then click Reconcile Now button, if reconciliation criteria is met

10. Reconciliation Report Screen • When you click Reconcile Now button, Select Reconciliation Report screen will be displayed • You can either display report or print reports

11. Reconciliation Report Screen

12. Reprint Reconciliation Report • Reports/ Banking/ Reconciliation Detail or Reconciliation Summary • Also when you open Reconcile Screen, the bottom left there is a Last Report button, which will allow you to print the previous months reconciliation report • You do not have access to reports earlier than that

13. Possible Reconciliation Errors • Typo errors when you entered Ending Balance, Service charge or Interest Earned • Some checks are not entered in your files • Some Automatic deductions are not entered • You may have transposed some numbers (if the difference is a multiple of 9)

14. Reconciliation Rules • A check mark in the clear column of a transaction in a bank account means that the transaction has been reconciled and should not be modified or deleted • An asterisk (*) in the clear column means that reconciliation is in progress but is not complete

15. Handling Bounced Checks • When there are insufficient funds in an account to cover a check, a check bounces, and it called an NSF (nonsufficient funds) check • If your bank returns a check from one of your deposits (customer payments) • use an invoice to track the receivable from the customer until your receive a payment from the customer that clears your bank

16. Steps to handle a bounced check Step a: Add two new transactions to your bank account register. Open the Checking account register and enter the first transaction : Date: The date the check bounced Number: Bounce Payee: Name of the customer Payment: Amount of the bounce check Account: Accounts Receivable Memo: Bounced Check #, date etc

17. Bounced Check (contd.) Step b: Second transaction: Add the bank service charge to your checking account Date: Date the fee is charged Number: Bounce Payee: Name of the customer Payment Amount: Amount of fee Account: Bank Service Charges Memo: Bounce Check Charge

18. Bounced Check (contd.) • These two transactions will do the following: • The first transaction will reverse the original deposit entry in the checking account and the funds will appear in Accounts Receivable showing that customer owes this amount • The second transaction will reduce checking account by the bank charges

19. Bounced Check (contd.) Step c Add a new item to be used for charging the customer for NSF charges: Open the Item List: Lists/ Item List. Click Items button at the bottom and select New. New Item dialog box will open, select the following: Name: NSF Charge Type: Other Charge Description: NSF Service Charge for Bounced Check # Amount: Amount you want to charge Account: Other Income

20. Bounced Check (contd.) Step d: Create a new invoice for the customer whose check bounced to charge them for the NSF charges Customer:Job: Name of customer Date: Date check bounced Invoice #: Original Invoice# with “Bounce” Item: NSF Charge, (non taxable) The customer now owes you for the original amount plus a service fee

21. Bounced Check (contd.) Step e: Redeposit the replacement check Use Customers/ Receive Payments Customer:Job: Name of customer Date: Date of redeposit Amount: Amount of replacement check Deposit option: Deposit to bank (instead of Group with Undeposited funds). Select the bounced check, service charge invoice against this payment.