Q. Where do I find the bank reconciliation in the Clients & Profits X?
It's part of the checkbook. Choose Accounting > Checkbook. Then choose Edit > Check Tools > Reconcile.
Q. Do I have to reconcile my bank accounts?
No. Using Clients & Profits X to reconcile the monthly bank statement to the checking account's balance isn't a requirement, but a tool to make your job easier. By using the bank reconciliation feature, you can verify the actual amount of cash you have available, make sure all cash transactions are recorded, and see that the bank didn't make an error on your account. It's as easy as clicking a checkbox for each item printed on the statement.
Q. We have several checking and savings
accounts. Should I reconcile every account?
Ideally, reconcile every checking and savings account, even if it has only a few transactions. You at a minimum want to make sure that the bank didn't make a mistake. Clients & Profits X can help you to manage multiple checking and savings accounts and reconcile each account separately. Each checking and savings account requires its own general ledger account number in your Chart of Accounts, which is entered at the beginning of each reconciliation that is performed.
Q. What are the basic concepts in the bank reconciliation?
The bank reconciliation uses information in the general ledger to generate the list of outstanding items. It does not
use the records in the Checkbook or Client Payment windows to generate the list of outstanding items (even though there is a "Cleared" checkbox on checks in the Checkbook). This is important to understand when the reconciliation does not balance per the questions below on how to troubleshoot an out of balance bank reconciliation.
Any item which is not outstanding must be marked as cleared. The bank reconciliation only includes outstanding items
when calculating the reconciled balance (some accounting programs use cleared items to determine the reconciled balance, so this may be new to you). If an entry appears that doesn't belong and isn't outstanding, mark it as cleared. Research it later; marking it as cleared doesn't affect the database outside of the reconciliation.
• C&P X uses the current general ledger balance and all outstanding items through today to reconcile the account, not the balance and outstanding items through the statement's ending date (which is the practice in some accounting programs).
Journal entries impacting the checking or savings account being reconciled will also be listed in the bank reconciliation as items to clear or leave outstanding, not just the checks and client payments.
When the reconciliation is balanced, print the list of cleared and outstanding items, this will be the only opportunity to print the cleared items, since once the reconciliation is saved after it has balanced, the cleared items will not be available for viewing again.
• The overall principle of the bank reconciliation in C&P X is to add or subtract outstanding items (depending on if their total is a net debit or credit to the cash account) to or from the bank statement's balance, then this total amount should reconcile to the current cash balance in the general ledger.
Q. Once I reconcile the bank statement,
should I print out the Bank Reconciliation Worksheet immediately?
Yes. Print before you leave the Bank Reconciliation window. When the difference is zero and you’ve clicked Save, you’ll be prompted to print the Bank Reconciliation report. Do this now. If you save the window before printing the report, the report can not be printed later.
Q. What's a batch number?
A batch number groups deposits from various clients into a single line item on the bank reconciliation. Typically, a batch number is used that contains the date of the deposit and some other identifying number, such as..."101508-1". This batch number identifies the date as 10/15/08, and this is deposit slip number one. You don't have to use a specific number format (the field is completely user defined), but when reconciling the statement, a batch number that has a specific meaning helps. Batch numbers are entered into the "Batch ID" field when adding client payments into C&P X.
Q. Should we use the "show deposits by batch number" option when doing our C&P X bank reconciliation?
Yes. If you’ve previously united by batch number separate client payments that were deposited at your bank, select that option. Then in the Bank Reconciliation window, instead of the individual client payment amounts, you’ll see the deposit amount for the batch which is much easier to match to your printed bank statement which shows the batch deposit amount, not the individually deposited checks. The reference number will be the deposit batch number instead of the usual reference number beginning with PMT#.
Q. What is the "statement ending date"?
The statement ending date is from your printed bank statement and represents all transactions recorded by your bank through that date. However, the C&P X bank reconciliation lists all outstanding transactions, even those that are beyond the statement ending date.
Q. I found an error while I was reconciling an account. How do I fix the error without losing my reconciliation?
A partial bank reconciliation can be temporarily saved by clicking the Save button without losing the work you've done. Then after fixing the error, opening the bank reconciliation window for the same bank account will restore your work to date.
Q. Do I have to reconcile the bank accounts before starting work in the next accounting period?
No. While the bank reconciliation and the general ledger work together, the accounting system isn't dependent on reconciled bank accounts.
Q. Do I have to reconcile the bank accounts at the same time each month?
No. Your accounts can be reconciled at any time.
Q. How are transactions sorted in the bank reconciliation window?
Transactions are sorted by reference number in three different sections: Deposits (PMT#) appear in the first section, checks (CK#) in the second section, and journal entries (normally JE#) in the third section. You can change the sort of each section by clicking on any column heading: reference, date, amount, or description (JE section only).
Q. How is the difference between the reconciled
balance and the general ledger balance calculated?
The total of the outstanding items is subtracted from or added to (depending if the total of the outstanding items is positive or negative) the ending bank statement balance to produce the reconciled balance. Clients & Profits X compares the reconciled balance with the current cash balance for that account in the general ledger and calculates the difference. Once the difference is zero, that account has been successfully reconciled.
Q. Can I print out a hard-copy of the
bank reconciliation before I save it?
Yes. The "Print" toolbar button in the reconciliation window prints a list of all outstanding items, all cleared items, or both. Each report also shows the calculation of the difference between the reconciled balance and the cash balance in the general ledger. These reports can be printed at any time during the reconciliation. When the difference is zero and you’ve clicked Save, you’ll be prompted to print the bank reconciliation report. This is your last chance. If you save the window without printing the report, the report can not be printed later because the cleared items will be removed from the reconciliation window after saving a balanced bank reconciliation.
Q. Why is the "total JEs outstanding" list
This section only shows journal entries added directly to the general ledger for such things as bank transfers, interest income, proceeds from loans or sales, service charges, and adjusting entries. If an account didn't have these kinds of entries during the month, this section will be empty.
Q. Can I change the statement balance,
statement ending date, or other options from the bank reconciliation
No. Once you've made your selections and have started reconciling the account (marking items as cleared), you'll have to temporarily save your work, then again choose Edit > Checkbook Tools > Reconcile, then enter your new selections.
Q. Do I have to balance in order to save the bank reconciliation?
No. If the difference is not zero, you’ll be prompted to save the bank reconciliation temporarily. Your selected items are not actually cleared, but remain marked as cleared items the next time this window is opened for this account. But, once the reconciliation balances and is saved, then cleared items will be removed from this window the next time it is opened for this account.
Q. I'm having problems reconciling. What
do I do now?
There is a quick analysis you can perform to confirm there is a problem. To do this procedure, you must have a balanced printout (with a zero difference) of your last Clients & Profits X bank reconciliation. From the first window, enter the bank statement's ending balance from the last time you balanced, as shown on your printout. Do not select the option to "mark all items as cleared." When you click OK, the outstanding items will be added and subtracted from the last statement's balance in the bank reconciliation window. The difference should still be zero if there is no problem. It should still reconcile using the prior statement's reconciled ending balance because the bank reconciliation window is using the cash balance in the general ledger as of today, which includes the new outstanding items since the last bank reconciliation in that balance.
If there is a problem, then it's caused by one or a combination of the following situations:
Note: Each situation falls under the three areas that drive the calculation in the bank reconciliation window, which are the total of uncleared outstanding items, the cash account balance in the general ledger, and the bank statement's ending balance:
1. Outstanding items are not listed that should be listed. User errors and system errors can cause this situation.
User errors include:
a. You forgot to enter charges or deposits the bank recorded, such as account fees or interest earned. Temporarily save the reconciliation, then add these items (normally as journal entries), then continue the reconciliation.
b. You forgot to post some checks, payments, or journal entries. Temporarily save the reconciliation, post all unposted checks, payments, and journal entries, then continue the reconciliation.
c. You accidentally cleared an incorrect outstanding item, overlooked clearing an outstanding item, or an outstanding item had a different amount than what was on the bank statement. To check for these conditions, print the cleared items report by clicking the Print toolbar button (you won't lose your existing work). Compare the totals on this report to the total deposits and withdrawals on your bank statement to see if they differ. If they do, then most likely one of the three conditions above occurred. If you have to edit the amount of a record in C&P to match the bank statement, then temporarily save the bank reconciliation, make the change to the record, then return back to the bank reconciliation.
d. You closed the year before all outstanding items from periods 1-12 were cleared. For how to address this situation, see the question below on how to adjust for outstanding items not appearing on the list of outstanding items.
System errors include:
a. There are partially posted reference numbers in the general ledger, with the missing debit or credit to the cash account. Print the Out of Balance Checker under General Ledger > Edit > G/L Tools > Auditor to discover such items. For instructions on how to fix these out of balance reference numbers see the best practice guide on fixing out of balance financials.
b. There are checks and/or client payments that did not post at all into the general ledger. This is very rare, but it can happen. If the check or client payment is present, but it's missing in the general ledger, it needs to be manually added. For steps on how to do this, see the following question about how to adjust for outstanding items not appearing on the outstanding items list. Normally, such items are discovered when trying to clear an outstanding item and it's not listed. You find the item in the Checkbook or in Client Payments, but you are unable to find the corresponding item in the general ledger (e.g. check number 1000 does not have a corresponding CK#1000 in the general ledger). If you want to be pro-active in finding these items, then make sure both your A/R and A/P invoice agings through today match their respective control accounts. If they don't match, one possible reason is that no activity at all posted into the general ledger for a posted vendor check or client payment. Links to the best practice guides on this topic that explain how to do this are available on the list of monthly recommended accounting procedures in C&P X.
Note: An outstanding item that is cleared on the bank statement, but not listed as an outstanding item to be cleared in the bank reconciliation window, is not a problem. Why? Because C&P X uses the uncleared list of outstanding items in the reconciliation window's calculation. Thus, a listed outstanding item that is marked as cleared in the reconciliation window and an outstanding item that needs to be marked as cleared, but is not listed at all in the reconciliation window, both have no impact to the calculation in the bank reconciliation window.
2. The cash account balance in the general ledger is not accurate. There are two common reasons:
The account total for the cash account is wrong, which is caused by a system posting error. This will normally make your balance sheet become out of balance as well. For steps on how to fix this, see the step regarding the Account Totals Checker on the best practice guide on fixing out of balance financials.
b. A user accidentally used the cash account on an A/R or A/P invoice. These will update the cash account in the general ledger when posted, but not show up as outstanding items in the bank reconciliation window. To find these, print the Audit Trail, under General Ledger > Print G/L Reports, for all periods from the date of the last reconciliation through today, to and from the cash account being reconciled. Look for any reference numbers that begin with an AP# or AR#. Unpost and fix these records accordingly, then repost them. Though the posting and unposting to the cash account will not show up as outstanding items to clear, this is Ok, since they offset each other.
3. The wrong bank statement balance was entered. Most likely you entered the wrong value from the bank statement. Double check that the correct statement ending balance was entered. In very rare situations, the bank statement itself could be wrong. Double check it with the online balance.
Q. Are there any other reasons outstanding items are missing
from the reconciliation window?
1. If this is a recently-started database, the old
outstanding information may not be entered because the bank's beginning balance was entered a single debit to the cash account.
2. If this database was converted from another version of Clients & Profits X, the outstanding items from the old database may not be listed.
Q. How do I adjust for outstanding items
not appearing on the list?
Caused by closing the year:
If you find any items that haven't cleared the
bank and aren't on the outstanding list, then the ending bank balance entered
in the first window of the bank reconciliation needs to be adjusted to work around this. Subtract missing outstanding checks and
add missing outstanding deposits to the ending balance.
Think of it this way - since you can't tell the computer
that these items are outstanding, you adjust the statement ending
balance as if the items had cleared the bank. This adjustment is
no longer necessary in the month that items actually clear the bank since C&P reconciles based on uncleared outstanding items and these items now no longer need to be listed as outstanding. Recall that an unlisted outstanding item and a cleared outstanding item impact the bank reconciliation the same.
Remember, you must temporarily save the bank reconciliation
window in order to adjust the statement balance in the first window. You'll know that the bank reconciliation balances if the amount of the missing uncleared outstanding items equals the amount by which the reconciliation does not balance. This amount will be by how much the bank statement's ending balance is adjusted to "force" the bank reconciliation to balance.
Caused by posting error:
If you don't find the reference number in the G/L, then it didn't post at all (assuming it wasn't a prior year item purged when closing the year - see above for how to address that situation). In this case, unpost and repost the problem check or payment. Then find the reference number in the G/L (it will be there now) and click the Verify button at the top. It will add back the missing entries. Last, post all unposted JEs.
The bank rec will now show multiple entries for these items (two postings and one unposting). Clear them all.
Q. We've never reconciled our bank accounts in Clients & Profits X. How do I start?
If you've never reconciled your bank statement using Clients & Profits X, the first thing you'll need to do is clear all the old outstanding items in the bank reconciliation window (which will be quite long) leaving only the actual outstanding checks and deposits since the last statement ending date:
1) Choose Accounting > Checkbook.
2) Choose Edit > Checkbook Tools > Reconciliation.
3) Enter the G/L account number for the cash account you wish to reconcile
4) Enter the ending bank statement date for the last bank statement you have.
5) Leave the ending statement balance blank.
6) Select the option to "clear all entries."
7) Click OK.
(The Bank Reconciliation window opens. Every item is marked as cleared.)
8) Click checkboxes for items still outstanding.
(The "X" is removed from a checkbox, thus identifying an item as outstanding.)
Note: Be careful if you have old items that have not cleared the bank. Do not mark them as cleared just because most items for that date range have cleared.
9) When you finish, note the amount listed for the Difference, and save temporarily.
10) Now, follow steps 1 through 3 again (do not check "clear all entries" this time). Now, for the ending bank statement balance, add the amount that was listed for the Difference. This amount will "force" the bank reconciliation to balance.
(The Bank Reconciliation window opens. The difference listed should now be zero.)
11) Print the Bank Reconciliation Worksheet report.
12) Click Save.
The next bank statement you receive can be reconciled normally and all the cleared old outstanding items will no longer appear.