How to Reconcile Your Bank Account with the Automatic Bank Reconciliation with QuickBooks Online Plus for the First Time

Reconciling QuickBooks Online Bank Account

If you just made the transition to use QuickBooks Online Plus, congratulations.  Now I hope  you want to use the automatic bank reconciliation that is included with QuickBooks Online Plus. The problem exists that there is no mechanism to enter checks that were outstanding in your bank reconciliation for the month prior to your conversion to QuickBooks Online Plus. After researching the Intuit website and Google there is no guidance for this fundamental topic.

The workaround is very easy. Before I get into the specifics, what needs to occur, is that the outstanding checks that exist  for the month prior to your conversion QuickBooks Online Plus  must be recorded into QuickBooks Online Plus. To accomplish this 3 steps are required.

QuickBooks Online Bank Reconciliations Tips

Step 1–Pick  any day prior to your  conversion date.  For instance if you are beginning the year January 1, 2010, then select a date in December of 2009 and make a journal entry to temporarily add cash to the QuickBooks Online Plus  bank account because in the next step you will have to reduce the cash by the amount of the outstanding checks in order for the outstanding checks to be reflected within the QuickBooks Online Plus  automatic bank reconciliation. To accomplish this, prepare a journal entry as if you are making a deposit, with a debit to the bank account and credit opening balance equity account for the amount of the outstanding checks.

Step 2-- Temporarily set up a vendor to be used when entering the outstanding checks  and call the vendor “Prior months outstanding checks”. Now, enter each outstanding check through the Enter bills (and the account being debited would be the opening balance equity account instead of a typical expense account) drop down menu within  QuickBooks Online Plus  and record a  description such as “prior months outstanding checks”  so that there is a trail relating to this adjustment. Be sure  not to assign amounts to the expense accounts, since you are debiting the opening balance equity account. In summary, this entry sets up a temporary payable that you are about to pay in step three.

Step 3-- Now go into the drop down menu called “Pay One Vendor”  and pay each bill using the date shown in your outstanding list. This step relieves the payable and effectively causes the check to be outstanding  for the QuickBooks automatic bank reconciliation. Using Pay One Vendor is a better option to control the check number of the bill payment.

In summary, you have recorded the outstanding check without any effect on cash because the increase in the cash in step 1 is reduced by the decrease in cash in step 3. In addition,  the account payable that was set up in Step 2  has been reduced by  the payment in step 3,  and the opening balance  equity that is set up in step 1 is offset by the establishment of the payable which effectively debits the opening equity balance through step 2.

After I figured out how to accomplish this work around, it took 15 minutes to record the adjustments to have the QuickBooks Online Plus  automatic bank reconciliation reflect the prior periods outstanding checks. The second month literally took 5 seconds to reconcile and the automatic bank reconciliation worked perfectly as intended.

Sandor Lenner, C.P.A. has been providing accounting services for 35 years. He is also a Certified QuickBooks ProAdvisor and works as a consultant for a Miami Accounting CPA firm where he provides QuickBooks support and QuickBooks consulting.