Employees log their hours, you review and approve them, and QuickBooks does the rest. Cut checks or pay employees via direct deposit, issue W2s at tax time, and file taxes electronically – all from QuickBooks. However, sometimes there are differences between the two balances and so you’ll need to identify the underlying reasons for such differences. All of this can be done by using online accounting software like QuickBooks, but if you are not using accounting software, you can use Excel to record these items. After adjusting all the above items what you’ll get is the adjusted balance of the cash book. We offer reconciliation reports, discrepancy identification, and live accountants to work with for ease and confidence when closing your books.
Step 2: Work Out the Balance as Per Bank Side of the Bank Reconciliation Statement
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. Nowadays, all deposits and withdrawals undertaken by a customer are recorded by both the bank and the customer. The bank records all transactions in a bank statement, also known as passbook, while the customer records all their bank transactions in a cash book. Remember that transactions that aren’t accounted for in your bank statement won’t be as obvious as bank-only transactions.
For example, you wrote a check for $32, but you recorded it as $23 in your accounting software. Make sure you enter all transactions for the bank statement period you plan to reconcile. If there are transactions that haven’t cleared your bank yet and aren’t on your statement, wait to enter them. Easily run financial statements that show exactly where your business stands. Access your cash flow statement, balance sheet, and profit and loss statement in just a few clicks.
Step 3: Start your reconciliation
After you reconcile, you can select Display to view the Reconciliation report or Print to print it.
Match your transactions
- The bottom of the screen contains a running total of items you have checked off, and thus have been reconciled.
- Whereas, credit balance as the cash book indicates an overdraft or the excess amount withdrawn from your bank account over the amount deposited.
- Before you start with reconciliation, make sure to back up your company file.
- However, there might be a situation where the receiving entity may not present the checks issued by your business to the bank for immediate payment.
- It summarizes the beginning and ending balances, and it lists which transactions were cleared and which were left uncleared when you reconciled.
The bank will debit your business account only when they’ve paid these issued checks, meaning there is a time delay between the issuing of checks and their presentation to the bank. These time delays are responsible for the differences that arise in your cash book balance and your passbook balance. Typically, the difference between the cash book and passbook balance arises due to the items that appear only in the passbook. So it makes sense to record these items in the cash book first in order to determine the adjusted balance of the cash book. Once the adjusted balance of the cash book is worked out, then the bank reconciliation statement can be prepared.
Therefore, an overdraft balance is treated as a negative figure on payroll expenses definition the bank reconciliation statement. After adjusting all the above items, you’ll end up with the adjusted balance as per the cash book, which must match the balance as per the passbook. Finally, compare your adjusted bank balance to your adjusted book balance. Since you’ve already adjusted the balances to account for common discrepancies, the numbers should be the same.
Compare your bank statements
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. 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). We strongly recommend performing a bank reconciliation at least on a monthly basis to ensure the accuracy of your company’s cash records. A monthly reconciliation helps to catch and identify any unusual transactions that might be caused by fraud or accounting errors, especially if your business uses more than one bank account.
Create a separate login for your accountant to make it easy for her to work with you. You can exchange messages and share documents directly inside QuickBooks, too. We know that taking hours to find amounts that are off by a few pennies doesn’t make sense.