do you have trouble understanding some of the ideas regarding bank reconciliation well this
video will show you how it's done and explained the ideas behind it 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 and don't forget to subscribe
to get updates on new videos that come out all the time when doing bank reconciliation the
most important number is called the cleared balance and I'm going to show you what that
means and I'm going to explain why the cleared balance is really the most important number we
know that checking one by one proves accuracy and if we go through our records carefully and match
all of our numbers to the bank's numbers we know that everything is correct and we explained that
in the previous video however if there are many transactions how can we be sure that we matched
everything properly in other words the mistake in our records that we're looking for when we do
bank reconciliation might not be found if we make a mistake while we're doing bank reconciliation so
how do we make sure that we include everything in the bank reconciliation process the way to
do that is to compare the balances because we know if all the same transactions are in both
places then the balances should be the same correct well how do we compare the balances
to make sure that we did not make a mistake when matching off transactions between our quickbooks
online records and our bank statement well we know for sure what the balance of the statement
is and we can always use a calculator to check if the bank made a mistake when finding the balance
on the statement so if we assume the statement is correct because it's easily checked then as
we do the reconciliation each transaction in QuickBooks that we find matches the statement
we mark as cleared QuickBooks will total all of the cleared transactions and report to us a
cleared balance it is the cleared balance that we compare with the bank statement balance to prove
the records match and everything is correct so let me give you a visual to help explain this idea as
we compare everything in our quickbooks records to everything in the bank statement we will mark
it off we will click a check mark that indicates that it is cleared since we know for sure what
the bank balance is we do something special as we mark everything cleared as we mark each item
in our quickbooks online cleared we add it to the quickbooks online cleared balance and we see if we
finish with the same balance as the bank so watch how this would work if we mark off deposit number
one as cleared QuickBooks Online tells us that the cleared balance is 400 because it's the only one
marked off as cleared but then when we mark off deposit number two is cleared QuickBooks Online
says Oh deposit number one and deposit number two are cleared so they both belong as part of
the cleared balance then we mark off deposit number three is cleared and QuickBooks Online
will include all three deposits in the cleared balance then we mark off deposit before and the
cleared valence increases more now at the moment we mark off the last item on the bank statement
we add that to the cleared balance and it's only when the items that we marked as cleared match the
balance of the bank it's only at that moment that we know we've included everything in our
matching off and checking off and comparing and therefore we did the bank reconciliation process
correctly now you may well ask why do we compare the bank balance to the cleared balance why not
just compare it to whatever the balance is in our QuickBooks Online Records well you will see
that bank statements have a cut-off date which is usually the last day of the month and any deposit
or any check that we did record in our QuickBooks records that the bank did not have an opportunity
to record in the bank statement until after they cut the statement and sent it in the mail those
transactions will not be included in the bank balance because the bank did not know about the
transaction until after the cutoff date but we know about the transaction before the cutoff date
so we are including it in our QuickBooks Online balance and that's the reason why we simply can't
compare the quickbooks online balance to the bank balance we have to stop counting when the bank
stopped counting therefore we can only compare the bank balance to the balance of the ones that we
have indicated cleared the bank if we do it that way the balances will match and we will know that
we did not make a mistake during the marking off or checking off or comparing one by one process
as we were doing the bank reconciliation so we know we have done a successful
bank reconciliation when the cleared valence matches the bank balance on the bank statement