Reconciliation and the Opening Balance – A Fundamental Truth

Reconciliation is one of a Bookkeeper’s fundamental tasks. After all, reconciliation confirms that what is in QuickBooks is what is in the bank. A reconciliation is where bookkeeping issues are going to rise to the surface. Here is where you will discover that you have too many transactions, not enough transactions, or incorrectly categorized transactions.

At it’s core, you begin a reconciliation by comparing a physical statement (paper or pdf) to what is in QuickBooks. The first step is to compare the Opening (Beginning) balance of that statement to the Opening (Beginning) to ensure that you have a good starting point.

What if the Opening Balances don’t match?

Horror of Horrors!!! The Opening balances don’t match. How could this be?!?! Especially if you reconciled last month, the assumption is last month’s ending balance would be this month’s Opening balance. Before we go full fledge into panic mode, let’s first understand where the Opening Balance is QuickBooks comes from to better understand what the opening balance is off. There is a underlying Fundamental Truth about where this balance comes from that, once you have firm grasp of this Truth, when you come across of a discrepancy in the balance.

Fundamental Truth about the opening balance

Reconciliation is really just math (Opening Balance + Cleared Deposits – Cleared Payments = Ending Balance) so it stands to reason that the Opening Balance has math behind it, and you’d be right!! The Fundamental Truth for the opening balance on the reconciliation screen is that: The Opening Balance is the sum of previously reconciled transactions. It is not:

• The Ending Balance from last month statement
• The reconciled balance the last time I reconciled in QuickBooks
• The register balance

It is a common misunderstanding to hold onto some of these beliefs of what the Opening Balance should be but, once you truly grasp the fundamental truth about where the opening balance comes from, it will open up a new realm and a different way to approach the issues that impact the Opening Balance

Opening Balance in QuickBooks Online

QuickBooks Online’s Opening Balance is recalculated every time you enter the reconciliation screen and the opening balance is the sum of every transaction that is reconciled in the register. QBO allows you to reconcile a transaction directly and the register and, unlike desktop, this action will impact the opening balance. To confirm this balance, you can run a report for all dates and filtered for only reconciled transactions. If you run this report, you will see that the opening balance and the total of this report will match. We will take a deeper dive into troubleshooting WHY this is incorrect , and how you can correct it to reconcile.

Opening Balance is Desktop

QuickBooks Desktop allows you to reconcile transactions in the register, however the opening balance is not reflected when you do that. You have to reconcile the transaction through the reconciliation function in order for the opening balance to be properly reflected. So the difference between desktop and online is whether the transaction has been reconciled through the function or not.

If you have marked a transaction reconciled in the register in desktop and it’s not in the opening balance, you would want to unreconcile it in the register and do a “mini-reconciliation” to reconcile that transaction in Desktop.

This will be part of a larger reconciliation course in the coming months.

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