QuickBooks - Balancing the Bank Statement

Let’s quickly review why the bank statement should be balanced each month as soon as you receive it:

• Finding Errors. While banks don’t make errors very often, you only have a certain amount of time to alert the bank if you do find any.


• Verifying Entries. Balancing the bank statement is one way to ensure your entries are being recorded properly in QuickBooks.


• Takes Less Time. The longer you wait, the more transactions you will have to examine, making the process take longer than necessary.

Before beginning, look over the bank statement and make sure all items that appear on it also appear in QuickBooks. In particular, look at the area of the statement that shows electronic withdrawals, such as ATM withdrawals and debit card purchases. Often, there will be one or more items in that section that are not in QuickBooks. Enter those before beginning the reconciliation process. Then:

1. Open QuickBooks. From the top menu, select Banking, then select Reconcile. The Begin Reconciliation window opens.

2. From the Account drop-down box, select account you wish to reconcile.

3. Enter the Statement Date as shown on the bank statement.

4. Verify that the Beginning Balance in QuickBooks is the same as the beginning balance on the bank statement. If these amounts are not the same, you may have changed or deleted a previously reconciled transaction. See #b below.

5. Enter the Ending Balance as shown on bank statement.

6. Enter any Service Charges. From the Account drop-down box, select a Bank Service Charges account.

7. If the statement shows any interest earned, record it in the Interest Earned box. From the Account drop-down box, select an Other Income account called Interest Earned. If this account does not exist, scroll up to create it.

8. Click Continue. The Reconcile window opens.

9. Place a checkmark next to each entry that appears on the both the bank statement and in the Reconcile window. Notice that there are two columns—one for Checks and Payments and one for Deposits and Other Credits. Under normal circumstances both of these columns will have checkmarks in them when you are finished.

10. While doing this, verify that the amounts recorded in QuickBooks match the bank’s amounts exactly. If an amount in QuickBooks is incorrect, double click the entry to open and change it.

11. If all entries were made correctly, when you are finished checking off everything, the Difference (located in the bottom right corner) will be zero. If it is zero, click Reconcile Now.

12. IMPORTANT: when given the opportunity, print a Detailed report and staple it to the bank statement. If you are running QuickBooks Pro, the printed Detailed report will be your only record should you ever need to go back and see a previous reconciliation.

If the Difference is not zero, errors were made. Verify the following:

• Checkmarks may be placed next to items that do not appear on the statement, or some items may not have been checked that should have been.


• Carefully verify that all amounts in QuickBooks match the bank statement amounts exactly, and that all entries on the statement are also in QuickBooks.


• It’s possible, although unlikely, that the bank made a mistake by recording an item incorrectly. If this is the case and you can verify that the Difference is the amount of the bank’s error, contact your accountant. There are a couple different ways to handle this and your accountant will be able to advise you according to his/her preference and your situation.


• Always try to make the Difference amount zero before clicking Reconcile Now.

Situations Requiring Outside Help:

a. Pro versions of QuickBooks allow access only the last month’s reconciliation. Premier versions allow access to all previous reconciliations. If you need a previous reconciliation report and are running QuickBooks Pro, ask your accountant if he/she is running Premier. If so, have your accountant upload your file to his/her computer, then generate the necessary reports.

b. Never delete or change a transaction after it has been reconciled. If you do, it alters the subsequent reconciliation, making it much more difficult. If the beginning balance in QuickBooks was not the same as on the statement, or if the Difference is not zero because a previously reconciled transaction was deleted, contact your bookkeeper or accountant to help resolve the issue.

c. If the difference amount was not zero when you reconciled, QuickBooks made an adjusting entry in both the checking account register and the account called Open Balance Equity (OBE). OBE should always have a zero balance. Contact your bookkeeper or accountant if you ever see a balance in this account.