would you like to be able to guarantee that your entire set of quickbooks online records
are correct well in that case then you need to learn how to do bank reconciliation
but what is bank reconciliation anyway
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bank reconciliation is a procedure that we do every month to prove that our quickbooks
online records are correct but does it prove that everything is correct well let's think about this
there's lots and lots of pieces of data in every single transaction that we record
and there are many many transactions that we record in our quickbooks online so does bank
reconciliation prove that every last piece of data in every single transaction is correct
no it does not so then what does bank reconciliation prove well at minimum it proves
that all transactions are included and that we did not miss a transaction that we should have
recorded into quickbooks online it also proves that there are no false transactions and no
duplicates that means there's nothing included in quickbooks online that should not be there
and it also proves that the money amounts of each transaction are correct so if at least the money
amounts are correct and the other conditions are true then we can assert that our quickbooks online
records are correct enough to be relied upon if we are audited or examined by an outside organization
like the irs or a bank that is allowed to audit us under the conditions of a loan
so how does bank reconciliation prove this well you get a bank statement at the end of each month
and the bank has recorded your transactions and listed them on the statement
you are also recording your own bank transactions inside your quickbooks online account specifically
in the account cash in bank all you have to do is compare each individual money amount of each
individual transaction that's listed on the bank statement to each of those same transactions in
quickbooks online and if the money amounts are the same for the same transactions then we can assert
that the bank records are correct and can be relied upon and therefore your quickbooks online
records are correct now when i say this to my student someone always objects someone always says
wait a minute how could matching the bank prove that it is correct the bank can make mistakes as
well what if we and the bank both made the same mistake etc etc well it is a good point that
the bank could also make a mistake and i have had previous students who actually worked
doing bank reconciliation and they did report to me that banks do periodically make mistakes
that affect the bank reconciliation process so why does matching one by one prove it's correct
well let's think of it in terms of chances odds likelihood or probability imagine you have your
bank statement with your transactions of the current month listed and you're going
to compare each individual transaction one by one to the transactions that you recorded into
quickbooks online what are the chances or the odds or the likelihood or the probability that both you
and the data entry person at the bank would make the exact same mistake at the exact same time
on the exact same transaction the probabilities so far exceed the remote that if this actually
does happen then i strongly suggest that you play exactly those numbers in the next lottery in fact
it is so unlikely that both the bank and we will make the exact same mistake on the exact
same transaction at the exact same time that we declare the transaction correct if it matches
so the most important question that will follow is what do you do if you find a mistake
if you notice a difference in money amount with the same transaction in
our quickbooks online records compared to that same transaction in the bank statement
what you would have to do is go back to the original source document of that transaction
if the transaction with the difference is a deposit you would have to look at a photocopy of
the actual deposit slip to find out who made the mistake in this example the difference is on check
number 34. you would have to look at the photocopy of check number 34 which should be included in the
envelope with the bank statement once you look at the actual check you'll be able to determine
who made the mistake once you determine who made the mistake you will do the following steps first
you will have to pause the bank reconciliation process don't worry quickbooks online will
remember everything that you put in the bank reconciliation window and you can close it at any
time and pick up on it later now if we made the mistake we just go and fix it in our quickbooks
online records the way that we previously learned if the bank made a mistake we will notify the bank
and show or send the source document and the statement with the mistake highlighted
the bank will then resend the corrected statement to us and once we have the corrected statement
we can resume the bank reconciliation process so this is an overview of what you're about to see
as we physically do bank reconciliation in quickbooks online
you