Reconciliation

Bank Reconciliations

Bank reconciliations are the top priority to ensure accuracy of records that all financial transactions have been recorded on the books.

Matching bank activity with QuickBooks activity helps to uncover errors such as unrecorded transactions, bank errors and even certain types of fraud. As a general rule all accounts that receive statements from outside institutions such as credit cards, loans, or lines of credit, should be reconciled on a monthly basis to keep them current. This is important for not only meaningful reports but also makes sure that the current year is correct for quarterly estimated and yearly tax filing purposes with a bank reconciliation as the backup document.

In QuickBooks most balance sheet accounts can be reconciled with a zero balance for those accounts without statements. Balance sheet accounts are Asset, Liability and Equity accounts. A great example is when a business is tracking customer deposits and prepayments in a separate liability account. Reconciling the account with a zero balance periodically ensures that customer deposits were applied correctly to invoices and reversed out of the liability account when the service was performed or product shipped. This ensures that customer balances, revenue and liability are stated correctly. This also works great with prepaid Vendor payments using an asset account for the prepayments. Reconciliations for these accounts don’t need to be performed through QuickBooks reconciliation screen, however, it is a very helpful tool for streamlining the process. For detailed instructions on how to do this please review Recording & Reconciling Customer Prepayments under Accounting with QuickBooks.