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Reconciling: what happens
Reconciling
XE "reconciling:bank account" a bank account has often been found to be a fearsome process, because of its unusual, strong demands. This process requires clear thinking, plus an understanding of what is happening. The sequence is explained here, and you may want to read all of it before starting. Opening the
Reconcile
window is almost the last step in this process. I am sorry that I can’t help you with the other requirement, which is to arrange a time free from interruptions and distractions. The good news is, once you get rolling with QuickBooks, provided that data entry is accurate, reconciling is fast and easy.
Reconciliation means
getting together. The bank statement
says one thing, the check register says
another, and you need to know how much money
you really have. The reconciliation
process in QuickBooks follows an approach
that is natural in computer programs.
It amounts to demonstrating that QuickBooks
can duplicate your bank statement.
Understanding the reconciliation
process begins with knowing that almost all
transactions are labelled as being in one of
three states:
Not Cleared
is a transaction that eventually will effect your bank account, but has not yet been reported in a bank statement.
Cleared
refers to a transaction reported in a bank statement. In addition, a rare few transactions will never appear on the bank statement. If a transaction has been recorded, and then nullified by a reversing transaction, you might be certain that neither will ever appear on your bank statement. They would add to zero, and both would be marked as cleared, because you are not waiting to see them on the statement.
Reconciled
applies to a transaction which has been recorded as cleared, and has gone through the reconciliation procedure. This is now historical.
Online banking or online payment transactions are recorded in a fourth state, described in Chapter 21.
The reconciliation screen starts with an
Opening Balance. It should be
the same as the ending balance from the
previous bank statement, and the beginning
balance of the current statement. This
number is not stored in any memory
cell. It is calculated, when
reconciliation is started, as the sum of all
historical (previously reconciled)
transactions.
Current transactions occupy most of the area in the
Reconcile
window. “Current” includes transactions not cleared, or those cleared but not previously reconciled. The
Ending Balance
is also entered. The program adds all cleared deposits to the beginning balance, and all payments are subtracted. The result should be the ending balance, and a
Difference
is shown at the bottom. When the difference is zero, hooray! Reconciliation is successful. QuickBooks has proven that it can indeed duplicate your bank statement. You can have faith in your current balance, which is then the bank’s ending balance, as adjusted by recent transactions.
The transactions displayed in the
Reconcile
screen are “current” (not historical) transactions, of all dates. Some users want to display only uncleared transactions up to the statement date. There are two reasons for showing them all. To show only transactions up to a cutoff date would be one more complication in the program, and one more opportunity for problems. From the user viewpoint, if a transaction is recorded but not cleared, that is the only pertinent fact. It is recorded but not cleared. For reconciliation, the date of recording does not make any difference.
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