Best Practices: Reconciling Accounts in QuickBooks

Posted on January 24th, 2018

We’ve all heard about the importance of reconciling bank accounts, but what does that really mean? And since we can log in to our bank accounts and view our balances any time we want, why is it necessary to reconcile them?

When we reconcile a bank account, we compare the bank balance in QuickBooks to the balance on the bank statement. Matching the transactions ensures that we’re properly recording all the bank transactions and the bank is clearing those transactions accurately.

The key to performing a quality bank reconciliation is addressing the outstanding transactions. These are transactions that we recorded but of which the bank has no record or vice versa. Now things are getting interesting!

Here’s a guide with a few examples of outstanding transactions and how to fix them:

Outstanding Transactions

As you can see, reconciling our accounts allows us to identify and fix errors in QuickBooks. This is an important step in maintaining good books and one that is often overlooked. Okay, now that we’ve reconciled our bank accounts, we’re done with our month-end close, right?

Not so fast! In addition to reconciling our bank accounts, we also want to reconcile several of our other balance sheet accounts. We can reconcile our

  • other current assets (prepaid expenses, employee advances, etc.),
  • long-term assets (e.g., security deposits), and
  • liabilities (payroll taxes, retirement plan payables, deferred revenue, etc.).

When the accounts don’t reconcile to zero, we review the outstanding transactions for reasonableness. If you haven’t reconciled your balance sheet accounts recently, then you will probably identify some errors in QuickBooks, such as duplicate transactions or missing journal entries.

The best practice is to reconcile bank and balance sheet accounts as part of our month-end close process. Once you start reconciling your accounts regularly, you’re well on your way to a strong accounting system!

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