What is Bank Reconciliation?
Think of reconciliation as balancing your checkbook. You're confirming that what QuickBooks shows matches what actually happened at your bank. This catches data entry errors, missing transactions, bank fees you forgot to record, and potential fraudulent activity.
Why Reconcile Regularly?
Accuracy
Fraud Detection
Financial Reporting
Professional Standard
Preparation & Requirements
What You Need Before Starting
Bank Statement
Your official statement from the bank
You'll need your bank statement for the period you're reconciling (typically monthly):
- Ending date and ending balance
- Service charges or bank fees
- Interest earned
- List of all cleared transactions
Where to get it: Online banking portal, email, or mailed paper statement
QuickBooks Register Updated
All known transactions entered
Before reconciling, ensure you've entered all transactions that appear on your bank statement: deposits, checks written, ACH payments, debit card purchases, bank fees, and interest.
Outstanding Checks List
Checks written but not yet cashed
Know which checks you wrote that haven't cleared yet. These should NOT be marked as cleared during reconciliation. QuickBooks will show them as outstanding.
Step-by-Step Reconciliation Process
- 1Start the Reconciliation
Open reconciliation window and enter statement info
- 1. Open QuickBooks and your company file
- 2. Go to: Banking → Reconcile
- 3. In the "Account" dropdown, select the bank account to reconcile
- 4. Enter information from your bank statement:
- Statement Date: Ending date from bank statement
- Ending Balance: Ending balance from statement
- Service Charge: Any bank fees (if not already entered)
- Interest Earned: Interest income (if not already entered)
- 5. Verify dates for service charge and interest
- 6. Click "Continue"
First-Time Reconciliation
If this is your first reconciliation for this account, QuickBooks will ask for the opening balance. Enter the beginning balance from your first bank statement. - 2Mark Cleared Transactions
Check off transactions that appear on bank statement
The reconciliation window shows two columns: Checks/Payments and Deposits:
- 1. Compare QuickBooks to Bank Statement:
- Look at each transaction on your bank statement
- Find the matching entry in QuickBooks
- Click the transaction to mark it with a checkmark
- Repeat for every transaction on the statement
- 2. Work Systematically:
- Start with largest transactions (easier to find)
- Then match deposits
- Then match checks and withdrawals
- Sort by date or amount to find transactions faster
- 3. Watch the Difference Amount:
- Bottom right shows "Difference"
- As you mark transactions, difference should decrease
- Goal: Difference = $0.00
Pro Tip:
Mark all cleared transactions at once if using bank feeds: Banking → Bank Feeds → Add/Match transactions first. Then reconcile. Bank feeds make this process much faster.
- 1. Compare QuickBooks to Bank Statement:
- 3Verify the Difference is $0.00
Ensure QuickBooks matches bank statement perfectly
When all cleared transactions are marked, check the bottom of the window:
Beginning Balance$10,000.00Ending Balance$12,500.00Difference$0.00If Difference = $0.00: You're ready to finish! Click "Reconcile Now".
If Difference ≠ $0.00: You have a discrepancy. See "Handling Discrepancies" section below.
- 4Complete the Reconciliation
Finish and save reconciliation report
- 1. With Difference at $0.00, click "Reconcile Now"
- 2. QuickBooks will prompt to create reconciliation report
- 3. Select report type:
- Summary: Shows totals only
- Detail: Lists every cleared transaction (recommended)
- Both: Creates both reports
- 4. Click "Display" to view report
- 5. Review report for accuracy
- 6. Print or save as PDF for your records
- 7. File report with bank statement for audit trail
Congratulations!
Your bank account is now reconciled. QuickBooks marks all cleared transactions with a checkmark (✓) in the register, and your account balance is verified as accurate.
Matching Transactions Tips
Common Matching Challenges
Transaction Amounts Don't Match Exactly
Bank shows $100.50, QuickBooks shows $100.00
Common Causes:
- Typo when entering transaction
- Bank fee deducted from deposit
- Foreign currency conversion
- Partial payment received
Solution: Edit the QuickBooks transaction to match the bank statement amount exactly. Record the difference as a separate transaction if needed.
Transaction Dates Don't Match
Entered on different day than cleared
This is normal. Use the date you wrote the check or made the purchase in QuickBooks, not the date it cleared the bank. Reconciliation handles the timing difference automatically.
Multiple Transactions That Sum to One Statement Line
Several QB entries = one bank withdrawal
Example: You paid 3 separate vendor bills, but bank shows one ACH batch payment.
Solution: Mark all the individual QuickBooks transactions. The total should equal the single bank line.
Handling Reconciliation Discrepancies
When the Difference is not $0.00, you have a discrepancy. Here's how to find and fix it:
Common Discrepancy Amounts & What They Mean
Difference = Exact Transaction Amount
You likely forgot to enter a transaction in QuickBooks. Check bank statement for transactions not in QuickBooks register.
Difference = 2x a Transaction Amount
Transaction entered twice (duplicate) OR you marked wrong transaction. Look for duplicates in register.
Difference = Small Amount ($0.01 - $10)
Likely a data entry error (typo) or rounding difference. Check amounts carefully.
Difference = Odd Amount
Multiple issues. Work through systematically by checking off transactions one by one.
Systematic Discrepancy Resolution
Find what changed since last reconciliation
- 1. Click "Locate Discrepancies" button in reconciliation window
- 2. Select account and click "Discrepancy Report"
- 3. Review list of previously cleared transactions that were changed
- 4. Investigate each changed transaction:
- Was amount edited after reconciliation?
- Was transaction deleted?
- Was cleared status removed?
- 5. Fix or restore changed transactions
Last Resort: Adjusting Entry
Use Only When All Else Fails:
If you cannot find the discrepancy after thorough investigation, QuickBooks allows you to create an adjusting entry. This should be rare. For amounts > $10, always find the actual cause.
To create adjusting entry: Click "Reconcile Now" with non-zero difference → QuickBooks offers to create adjustment → Only accept for very small amounts (< $1).
Common Reconciliation Errors
Duplicated Transactions
Same transaction entered twice
Transposed Numbers
$123.45 entered as $123.54
Missing Bank Fees
Forgot to record service charges
Wrong Account
Transaction posted to wrong bank account
Best Practices for Bank Reconciliation
Do: Reconcile Monthly Minimum
Reconcile at least once per month when you receive your bank statement. More frequent is better (weekly or daily for high-volume businesses).
Do: Save Reconciliation Reports
Print or save PDF of every reconciliation report. File with bank statements. Required for audits and provides proof of reconciliation.
Don't: Edit Cleared Transactions
Once reconciled, transactions are "cleared" (✓). Editing them creates discrepancies in future reconciliations. If you must edit, undo the reconciliation first.
Don't: Force Reconciliation with Adjusting Entry
Creating adjusting entries to force $0.00 difference hides real errors. Only use for amounts < $1 after exhaustive investigation.
Do: Use Bank Feeds When Possible
Connecting bank feeds (Banking → Bank Feeds) automatically downloads transactions, reducing manual entry errors and speeding up reconciliation.
Do: Reconcile in Date Order
Always reconcile periods in chronological order (Jan, then Feb, then Mar). Never skip months or reconcile out of order - this causes cascading errors.
Troubleshooting Reconciliation Issues
"Beginning Balance is Wrong"
If QuickBooks shows incorrect beginning balance when you start reconciliation:
Find what caused the beginning balance to change
- 1. Click "Locate Discrepancies" in reconciliation window
- 2. Click "Discrepancy Report"
- 3. Look for transactions that were:
- Deleted after being reconciled
- Changed after being cleared
- Had cleared status removed
- 4. Contact whoever made changes (check "Last Modified By")
- 5. Restore or fix the transactions
- 6. Re-run reconciliation
Critical
"Can't Find a Transaction"
If bank statement shows a transaction you can't find in QuickBooks:
- Check if it's in a different account (credit card vs checking)
- Look in undeposited funds account
- Search by amount: Edit → Find → Amount
- Check if transaction was deleted (look in Audit Trail)
- If truly missing, add it now before continuing reconciliation
Conclusion
Bank reconciliation is the cornerstone of accurate bookkeeping. By reconciling regularly and following these procedures, you maintain confidence in your financial data and catch errors before they become major problems.