and now we're finally going to address the issue that everyone has been waiting for first time
doing bank reconciliation with a frequently used account that has never been reconciled before if
you have any questions about this topic you can leave them in the comment section below and I'll
do my best to help you and of course if you feel the video helped you I hope you will click like
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people who start reconciling face this exact condition imagine you have been using a bank
account for several months before you started recording transactions into QuickBooks you then
started using QuickBooks to record transactions in this bank account you never reconciled and use
the account for several months now you want to start reconciling does that sound familiar well
if you were using the bank account for a long time without reconciling and then you started
using QuickBooks or QuickBooks Online for a long time probably you never entered a beginning book
balance now usually the beginning book balance is never entered in a case like this because
we were using the bank account for a long time before we started QuickBooks when we started
using QuickBooks we knew what the bank balance at the moment we started and there's always a
difference between the QuickBooks balance and the bank balance for unclear transactions at
any given moment we do not know what the book balance would have been at the moment we started
using QuickBooks so people just skip this and do not enter a beginning balance so let's look
at what happened at the startup we knew when we started using QuickBooks what the bank balance
was because it was listed clearly on the statement but we could not know what the book balance would
have been because we just started using QuickBooks we then proceeded to record every transaction in
the bank statement properly in our QuickBooks records and the same transactions that were
recorded in the bank statement were recorded in the QuickBooks records but unfortunately
the balance was never the same because we never started with the same number now when we go to
reconcile there's a big difference between the book balance and the bank balance and it must
have been caused by the beginning balance that was never entered into QuickBooks Online in the
first place so when you do your first month's bank reconciliation you have to adjust for the
fact that the book balance at the beginning was never entered that's why it's called the
beginning balance adjustment the difference in the first month's bank reconciliation must be
from the beginning book balance that was never entered so let's imagine you have been using the
bank account for a long time and then you started using QuickBooks Online for a long time and in a
case like this when you start reconciling you usually pick a specific moment to start doing
bank reconciliation and in this example let's imagine you start reconciling at the end of
April because you want May to be perfect so what steps do you do in a case like this well it's very
simple you only do two specific steps first you mark all transactions as cleared then when you
finish doing your reconciliation make a beginning balance adjustment and both of these steps take
two seconds if you're using quickbooks online or using QuickBooks desktop so let's imagine
that May is the first month that we need to make correct therefore april is the first physical bank
reconciliation that we do and when we go to do April's reconciliation the first thing we do is
clear all past checks and deposits and we do that by marking them as cleared now we do this because
we are assuming that all past checks have cleared and you may well ask how can we assume that all of
the past checks and quite frankly all of the past deposits or any other transactions have actually
cleared the bank well let's think of the context of the situation that you're in the only reason we
start reconciling in the current month is because we do not have time to go back and reconcile from
the beginning so if we cannot check everything we can only proceed from what we do know there's no
evidence that there is a mistake because if there is evidence then the mistakes would be fixable and
probably would have been fixed before deciding to start reconciling after several months therefore
we proceed as if there are no past mistakes if we do uncover past mistakes later in the process we
adjust accordingly as we see them so let's imagine you started entering transactions at the beginning
of you using QuickBooks or QuickBooks Online and you did not know the book balance the only
difference in that case must be what was excluded only from QuickBooks and with no evidence of past
mistakes we assume that this different amount was the book balance on the startup date and
the amount of the beginning balance adjustment should be the amount that was or should have
been the book balance at the moment we started using QuickBooks but then the question arises
what if there were undetected past mistakes well even if there were past mistakes Maes beginning
balance will be correct if you follow this method no matter how many mistakes you had before you
started reconciling the first month with the correct beginning balance will be perfect and
you will be able to reconcile perfectly from that point forward going into the future but there is
one last issue even if there are no past mistakes what if a check that you assumed was cleared and
you marked as cleared as part of the first month bank rec process and it was actually not cleared
what do you do if it clears after you start reconciling well that simply means that your
beginning book balance amount was not correct when you fate made your first beginning balance
adjustment so in the month that the check really clears you have to readjust the beginning balance
to make it what it should have been if you knew about the check when you did the first month's
bank rec so let's take a look at the diagram you assumed all past checks had cleared and you mark
them as cleared and maze reconciliation was perfect but there was one check really did not
clear and that check wound up clearing after you started reconciling so what would you do in that
case if you used the method that I just told you about with the two simple steps well you
would then have to add a third step after the fact should you delete it no it will change the
cleared balance if you delete it should you enter it no it's already entered so what's the solution
the solution in that rare case is very simple make another beginning balance adjustment to the bank
rec in the month that the past check really does clear the amount of the adjustment is the amount
of the recently cleared check that was mistakenly marked as cleared had you known about this unclear
check you would not have cleared it at the beginning excuse me you would not have cleared
it and the beginning balance adjustment would have been different because you would have chosen not
to clear this check so adjust for that amount when finishing the bank rec of the month that
the mistaken check has cleared the dates of both adjustments is the QuickBooks startup date for
that bank account in other words you didn't really know what the book balance was until all the
checks that you marked as cleared really did clear now that you know that now that all those checks
have cleared now you know the real amount of the beginning book balance and that's why the date of
that adjustment is the startup date it's the same date as the original beginning balance adjustment
you