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How to Process Bank Reconciliation in QuickBooks Online 2017 - YouTube
Channel: FitSmallBusiness
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Welcome to the Fit Small Business
QuickBooks Online training course.
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In this lesson we're going to cover how to
reconcile bank accounts in QuickBooks Online.
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To follow along with me log into
your QuickBooks Online account now or
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click the link below for a free 30-day
trial of QuickBooks Online. You can also
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click this link to access our full
QuickBooks Online course and other
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helpful resources. Let's get started.
Similar to your personal bank accounts
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it is important that you reconcile your
business bank accounts on a monthly basis.
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Reconciling is the process of
matching the transactions on your bank
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statement to what you've recorded in
QuickBooks. Reconciling your bank
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accounts regularly will help to ensure
any discrepancies between your records
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and the banks are resolved in a timely
manner, and timely notification of any
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fraudulent transactions. For example if
you notice transactions listed on your
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bank statement that you did not
authorize, you could notify the bank as
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soon as possible so that they can
investigate. Some of the benefits of
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reconciling your bank account in
QuickBooks are: all transactions on the
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bank statement get recorded in
QuickBooks, your financial statements
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such as the profit and loss statement
and the balance sheet are up to date
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(click the links below to learn more
about the profit and loss and balance
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sheet reports), all of the reconciled
transactions are marked in QuickBooks as
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cleared, and finally you are able to run
bank reconciliation reports that will
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provide the details of the items that
have cleared the bank and those that
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remain outstanding. Before we walk
through the steps of how to reconcile,
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be sure that you have your bank statement
handy for the account that you want to
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reconcile, we will refer to the bank
statement often during this process.
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From the homepage of your QuickBooks Online
account you want to go ahead and click
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on the gear icon located here in the
upper right hand corner. And right below
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tools the third option is reconcile.
The first thing that you want to do is go
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ahead and select the bank account that
would like to reconcile from the
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drop-down. After selecting your account
you might see a notification similar to
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this one here. So if your beginning
balance does not match, you will see this
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notification which lets you know that
you need to go ahead and fix that before
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you proceed with the current reconciliation.
So at some point someone
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accidentally probably made a change to a
transaction that was reconciled last month,
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and so now in this example we've
got a difference of $105.
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Now the nice thing about the
reconciliation process is you can simply
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click this link that says 'we can help
you fix it' and walk through the steps to
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go ahead and fix that out of balance.
You don't want to proceed with the
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reconciliation until this has been fixed
otherwise you won't be able to balance
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at the end. The next step you want to do
is go ahead and enter the ending balance
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that's on your current bank statement
that you want to reconcile to, and also
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enter the corresponding ending statement
date in this field here. If you have
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finance charges or any kind of interest
charges on your bank statement, go ahead
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and indicate the date here and the
finance charge amount in this field as well.
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And once you've completed all of
these fields you can click the start
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reconciling button here at the bottom.
Here is the new and improved
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reconciliation layout. So let's talk
about what's here. Statement ending
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balance: this is the amount that we just
entered in the previous screen from the
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actual bank statement. The beginning
balance is the amount of the ending
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balance from last month's statement.
QuickBooks will automatically populate
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this field for you. The cleared balance
is going to accumulate as you begin to
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reconcile each item in this screen. This
amount will change depending on whether
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you have selected a payment or a deposit
transaction.
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The payments amount will increase as you
select payments to reconcile from the
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detailed transaction section below. And
the deposits amount will increase as you
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select deposits to reconcile from the
detailed transactions below. The difference
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here is calculated by QuickBooks. It's
the difference between your statement
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balance and the cleared balance. Our goal
is to get to a difference of 0. In the
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transaction section below, you will see
all of the payments and deposits that
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have been recorded in QuickBooks as of
your statement ending date. You can
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filter this section simply by clicking
on the tab. So we can click on payments
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to see just payments only, we can click
on the deposits tab to see just deposits only,
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or we can go back to the default
which shows all payments and deposits.
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There is no right or wrong way to
reconcile. However, I suggest that you
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reconcile the area with the least number
of transactions first. Remember that our
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goal is to make sure that every deposit
and withdrawal listed on the bank
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statement has been marked cleared in
this reconciliation window. To mark an
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item as cleared you simply want to click
the radio button here in the far right
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column to select that and that item will
be marked as cleared. So let's say that
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we want to go ahead and start with our
deposits. As we know that has the least
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amount of transactions. And so with the
deposits you could actually look at your
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bank statement and mark each deposit
individually, or if you see all of these
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listed here then you can go ahead and
click the top radio button which will
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select all. And this is just confirming
that we want to select all of the
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transactions listed here. So we'll say
yes select all here. So once you've
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marked all the deposits in this window
that appear on your bank statement,
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you want to verify that the total deposit
amount cleared matches the total
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amount on your bank statement. So in this
example here are total deposits that
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we've marked as cleared equal $2369.15, and if
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that matches what's on your bank
statement then you are ready to move on
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to payments. If it does not match, then we
are going to cover tips on how to
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troubleshoot out of balances in just a
few minutes. So we'll go ahead and go to
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the payments tab and we will repeat the
same process of marking all of our items
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as cleared, or as I mentioned you may
want to do one by one since they're
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going to be several transactions here.
So you don't want to assume that
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everything listed is on your bank
statement. So again we want to verify
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that the total payments amount here that
we've cleared matches our bank statement.
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So in this example the total payments
equals $1,869.15,
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you want to double check and
make sure that that also matches what's
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on your bank statement. Again if your
withdrawals or payments amount is out of
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balance, we're going to discuss ways that
you can troubleshoot this issue in just
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a few minutes. Once all of your deposits
and withdrawals have matched the bank
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statement, you should have a difference
of 0, which is our goal. So now that we
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have our difference of 0, we can go
ahead and click the finish now button to
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generate our bank reconciliation reports.
So when we click this button, behind the
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scenes QuickBooks will mark all of the
deposits and credits and payments that
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we've reconciled as cleared. So let's go
ahead and run our report. And so you've
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got the option to just click done and
not view the report, or go ahead and view
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the report which is what we want to do.
And so here is our reconciliation report.
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And so at the top here is a summary, just
a summarized view of the checks and
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payments that cleared. And then down
below you'll see each individual item
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for the withdrawals and the deposits
that actually cleared. So I want to share
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a couple tips with you here. The first
one is: it's important that you save all
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bank reconciliation reports for every
bank account. The easiest way to do this
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is go ahead and create a folder (I would
suggest one folder for each bank account)
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and save each report so you should have
at least one reconciliation report for
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each month for each account into those
folders. To learn more about organizing
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key reports and documents such as this,
check out our small business bookkeeping guide.
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Click the link below to access
this guide. My second tip I want to share
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with you is: bank reconciliation reports
are one of the top five reports that
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auditors will request. In my experience
as an auditor, if you are not able to
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produce these reports, I can promise you
that the audit will not go well.
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Alright, so now let's talk about some
troubleshooting tips for reconciling
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your bank and credit card accounts in
QuickBooks Online. Try some of these tips
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if you're having trouble getting to a
0 difference between what's in
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QuickBooks and what's on your bank
statement. Tip number one: if possible,
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narrow the search down to the
transaction type. Figure out if you are
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out of balance with the withdrawals and
payments, or deposits and credits.
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Tip number two: if you are out of balance for
deposits and withdrawals, then tackle
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them separately. In other words balance
withdrawals first and then move on to
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deposits and credits, or vice versa.
Tip number three: look for the exact dollar
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amount that you are off. For example,
if your difference is $21.50,
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then look for a transaction for this
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amount on your bank statement, and then
on both the withdrawals and the payments
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section, and the deposits and credit
section of the reconcile window.
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Tip number four: triple check the information
that you entered from the bank statement,
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such as the ending balance and your
statement ending date. If either of these
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are incorrect, that could cause the other
balance as well. Tip number five: check to
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see if there are any transactions in the
reconcile window that you did not select.
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Remember if the transaction is on your
bank statement, then the radio button in
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QuickBooks should be marked in the
reconcile window. Tip number six: if you
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do have a transaction on the bank
statement that is not in QuickBooks,
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then you will need to add it to QuickBooks. To do so just select the finish later
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button from the drop down to save your work.
If the missing transaction is a
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withdrawal or payment, then you would
enter it as you normally would.
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We explain this more in our lesson on how
to create a check in QuickBooks which is
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linked below. If the missing transaction
is a deposit, then enter it as you
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normally would. We explain how to record
deposits in QuickBooks in another
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lesson linked below. Tip number seven:
take a break. If you've been at it for a
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while and you need a break, select the
finish later option to save the work
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that you have done so that you can
easily pick up where you left off.
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Sometimes taking a breather and coming
back can help you spot what's causing
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the difference quickly. And finally tip
number eight: while it might be tempting,
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I recommend that you don't click that
reconcile button until you have a
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difference of 0. The problem will not
go away. The difference will just carry
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over to the next month until you figure
it out. If you do hit the reconcile
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button and you've not figured out the
difference, QuickBooks will record the
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out of balance in a miscellaneous expense
account called 'unreconciled
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discrepancies'. Of course if we're talking
about a small amount of $5 or
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less, then it might be worth your while
to move on. At the end of the day you get
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to determine what amount you are
comfortable with. Reconciling your bank
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accounts do not change your financial
statements. However behind the scenes in
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QuickBooks the items that have been
reconciled, or filed,
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are in the check register with the
letter R. So let's head over to the check
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register so we can see that. So we are in
our check register and if you notice in
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this column, several transactions have
the letter R and that simply means that
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you have matched these up with your bank
statement and these have been reconciled.
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So one of the things you want to make
sure is that you don't want to make any
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changes to a reconciled item. This is
primarily due to the fact that you've
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balanced it with your bank statement.
You can edit the account information if you
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need to. So for example if you've
categorized something as meals and
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entertainment like this item here, and it
should have been office supplies, then
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you can go ahead and definitely make
that change because it will not change
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the actual amount. But you want to make
sure that you don't make changes to the
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date or the amount. If you do it can
cause your financial statements to be
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inaccurate and you will no longer be in
balance with your bank.
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That wraps up the lesson on how to reconcile bank accounts in QuickBooks Online.
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To access our full QuickBooks Online course
or any of the other lessons in this series,
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click this link. You can also find a link below this
video for a free 30-day trial
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of QuickBooks Online.
If you have feedback about this course
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or if you have any questions, please
leave a comment below.
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