QuickBooks provides you with great tools to make tax preparation faster and easier. The advantages include fast data entry from receipts or manual records, the ability to quickly identify and correct accounting errors, and the ability to, with the click of a button, import your QuickBooks records into tax preparation software like TurboTax. This post is for performing the first bank reconciliation for a new client.
As I have said, our ultimate goal here is simply to compile the information what we need to complete our tax return. We just want to get current year transactions into QuickBooks and assure we have all transactions with the correct amounts. Performing reconciliations against bank and credit card statements is part of the verification process. The problem with the first bank statement is that we have to account for prior year transactions that cleared in the first current year bank statement. This methodology will quickly move you past this problem without having to enter a detail of these prior year transactions.
Once you have cleared all current year transactions shown on the bank statement, you will have a remaining difference between the ending balance per the bank statement and the cleared balance in QuickBooks. This amount will be the total of the prior year transactions clearing on this bank statement in the example below, that amount is $1,000.
Rather than enter the individual transactions, we simply create a check in the amount of $1,000, dated the last day of the prior tax year, e.g., 12/31/08. In the example below I created a “Miscellaneous” vendor and used the “Ask My Accountant” other expense account to assure this adjustment was not confused with real transactions. Remember, because this is dated as a prior year transaction, the result would go to retained earnings for the current year.
Robert Guild is Advancer Certified QuickBooks ProAdvisor in Austin, TX who conducts CPE courses for CPAs and individual training and group classes to QuickBooks users. His company at www.QBCoach.biz, maintains a sixteen-station QuickBooks lab, providing hands-on training. You can contact him directly at rguild@QBCoach.biz or follow him on twitter at QBPro