Balancing accounts might sound like a tedious task, but its significance cannot be overstated. Think of your business finances as a puzzle — every transaction, every payment, every deposit is a piece of that puzzle. Reconciliation is the process of fitting those pieces together accurately, creating a clear picture of your financial landscape.

Step 5: Addressing Discrepancies

1. Once the underlying cause of the difference between the cash book balance and the passbook balance is determined, you can then make the necessary corrections in your books to ensure accuracy.
2. Journal entries, also known as the original book of entries, refer to the process of recording transactions as debits and credits, and once these are recorded, the general ledger is prepared.
3. Likewise, ‘credit balance as per cash book’ is the same as ‘debit balance as per passbook’ means the withdrawals made by a company from a bank account exceed deposits made.

This is where your accounting software can help you reconcile and keep track of outstanding checks and deposits. Most reconciliation modules allow you to check off outstanding checks and deposits listed on the bank statement. In order to prepare a bank reconciliation statement, you’ll need to obtain both the current and the previous month’s bank statements as well as the cash book. NSF checks are an item to be reconciled when preparing the bank reconciliation statement, because when you deposit a check, often it has already been cleared by the bank. But this is not the case as the bank does not clear an NFS check, and as a result, the cash on hand balance gets reduced. Give your customers the option to pay via credit card, debit card, PayPal, or bank transfer.

After adjusting all the above items what you’ll get is the adjusted balance of the cash book. However, there can be situations where your business has overdrafts at the bank, which is when a bank account goes into the negative as a result of excess withdrawals. Keeping your financial records in order is hugely important to the success of your business.

When all these adjustments have been made to the books of accounts, the balance as per the cash book must match that of the passbook. If both the balances are equal, it means the bank reconciliation statement has been prepared correctly. While reconciling your books of accounts with the bank statements at the end of the accounting period, you might observe certain differences between bank statements and ledger accounts. If this occurs, you simply need to make a note indicating the reasons for the discrepancy between your bank statement and cash book.

Reconciling Bank Accounts in QuickBooks

Reconciling bank statements with cash book balances helps your business know the underlying causes of these balance differences. Once the underlying cause of the difference between the cash book balance and the passbook balance is determined, you can then make the necessary corrections in your books to ensure accuracy. The information on your bank statement is the bank’s record of all transactions impacting the company’s bank account during the past month. Compare the ending balance of your accounting records to your bank statement to see if both cash balances match. When you have your bank statement in hand, you’ll compare each transaction with the ones entered into QuickBooks. We recommend reconciling your checking, savings, and credit card accounts every month.

Preparing a Bank Reconciliation Statement

Using cloud accounting software, like Quickbooks, makes preparing how to void a check a reconciliation statement easy. Because your bank account gets integrated with your online accounting software, all your bank transactions will get updated automatically and each item will be matched with your books of accounts. Connect QuickBooks to your bank, credit cards, PayPal, Square, and more1 and we’ll import your transactions for you. When you receive your bank statement or account statement at the end of the month, you’ll only spend a minute or two reconciling your accounts. QuickBooks organizes your data for you, making bank reconciliation easy. You’ll need a few items to perform a bank reconciliation, including your bank statement, internal accounting records, and a record of any pending cash transactions (either inflows or outflows).

QuickBooks processes the payment and transfers the money to your bank account. There’s even a mobile card reader so you can swipe or dip the card from your phone or tablet. Just like balancing your checkbook, you need to review your accounts in QuickBooks to make sure they match your bank and credit card statements.

If you’re not careful, your business checking account could be subject to overdraft fees. If you’re reconciling an account for the first time, review the opening balance. It needs to match the balance of your real-life bank account for the day you decided to start tracking transactions in QuickBooks. There are times when the bank may charge a fee for maintaining your account, which will typically be deducted automatically from your account. Therefore, when preparing a bank reconciliation statement you must account for any fees deducted from your account. Make sure that you’ve also taken into account all deposits and withdrawals to an account when preparing the bank reconciliation statement.