Many QuickBooks users are unaware that QuickBooks allows you to reconcile many types of accounts, including credit card accounts. It's important to reconcile the credit card account each month, as soon as you receive the statement. Here's why:
- Finding Errors. Credit card companies don't often make errors, but if they do, you only have a certain amount of time to alert the company if there are any.
- Verifying Entries. Reconciling the credit card statement is one way to ensure your entries are being recorded properly in QuickBooks.
- Takes Less Time. The longer you wait, the more transactions you will have to examine, making the reconciliation process take longer than necessary.
Before beginning, look over the credit card statement and make sure all items that appear on it also appear in QuickBooks. Often, there will be one or more items on the statement that are not in QuickBooks. Enter those before beginning the reconciliation process. Then:
1. Open QuickBooks. From the top menu, select Banking, then select Reconcile. The Begin Reconciliation window opens.
2. From the Account drop-down box, select the credit card account you wish to reconcile.
3. Enter the Statement Date as shown on the credit card statement.
4. Verify that the Beginning Balance in QuickBooks is the same as the beginning balance on the credit card statement. If these amounts are not the same, you may have changed or deleted a previously reconciled transaction. See #b below.
5. Enter the Ending Balance as shown on the credit card statement.
6. Enter any Finance Charges as shown on the statement. From the Account drop-down box, select a Finance Charges account.
7. Click Continue. The Reconcile window opens.
8. Place a checkmark next to each entry that appears on the both the credit card statement and in the Reconcile window. Notice that there are two columns-—one for Charges and Cash Advances, another for Payments and Credits. Under normal circumstances both of these columns will have checkmarks in them when you are finished. The Payments and Credits column will almost always have fewer entries than the Charges and Cash Advances column.
9. While doing this, verify that the amounts recorded in QuickBooks match the credit card statement exactly. If an amount in QuickBooks is incorrect, double click the entry to open and change it.
10. If all entries were made correctly, when you are finished checking off everything, the Difference (located in the bottom right corner) will be zero. If it is zero, click Reconcile Now.
11. QuickBooks will ask if you want to write a check to make a payment now, or enter a bill to make a payment later. Either way, you may elect to pay whatever amount you wish--the entire balance, a portion of the balance, or the minimum payment. If you don't want to do any of those at this time, click Cancel.
12. IMPORTANT: print a Detailed report and staple it to the back of the credit card statement. If you are running QuickBooks Pro, the printed Detailed report will be your only record should you ever need to go back and see a previous reconciliation.
If the Difference is not zero, errors were made. Verify the following:
- Checkmarks may be placed next to items that do not appear on the credit card statement statement, or some items may not have been checked that should have been.
- Carefully verify that all amounts in QuickBooks match the credit card statement amounts exactly, and that all entries on the statement are also in QuickBooks.
- It's possible, although unlikely, that the credit card company made a mistake by recording an item incorrectly. If this is the case, in order to continue you will need to enter the transaction into QuickBooks as it appears on the statement. Don't forget to contact the credit card company to resolve the issue. The next statement should show the correction - be sure to enter it into QuickBooks at that time.
- Always try to make the Difference amount zero before clicking Reconcile Now. If you absolutely cannot make the difference amount zero, see #c below.
Situations Requiring Outside Help:
a. Pro versions of QuickBooks allow access only the last month's reconciliation. Premier versions allow access to all previous reconciliations. If you need a previous reconciliation report and are running QuickBooks Pro, ask your accountant if he/she is running Premier. If so, have your accountant upload your file to his/her computer, then generate the necessary reports.
b. Never delete or change a transaction after it has been reconciled. If you do, it alters the subsequent reconciliation, making it much more difficult. If the beginning balance in QuickBooks was not the same as on the statement, or if the Difference is not zero because a previously reconciled transaction was deleted, contact your bookkeeper or accountant to help resolve the issue.
c. If the difference amount is not zero when you click Reconcile Now, in order to finish the reconciliation QuickBooks must make an adjusting entry in both the credit card account, and the account called Opening Bal Equity (OBE). This will need to be cleared out of OBE, because OBE should always have a zero balance. Contact your bookkeeper or accountant if you ever have a balance in OBE.
About the Author:
Do you have a specific accounting or QuickBooks problem? Would you like to see an article written about it? Contact Jennifer A. Thieme today with your article suggestion. Resolving accounting or QuickBooks issues is her specialty.
She's the owner of Solid Rock Accounting Services and has been in the bookkeeping, income tax, and payroll business for nine years. She's a Certified QuickBooks Pro Advisor, and a Registered Tax Preparer. Her clients receive QuickBooks training, general bookkeeping, income tax, and/or payroll services.
Visit http://www.jenniferthieme.com today for contact information.
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