11.5. Reconcile Cashbook
If you normally reconcile your bank statements each month you will find this facility a Godsend. If you don't normally reconcile, or don't really know what reconcile means, you probably leave this all to your accountant when it's time for your tax return.
You bought Equity so you could take control of your financial affairs and save money on your accounting bill. For Equity to provide accurate information and reports you need to check all your bank transactions against your bank statement to make sure everything was entered, and entered correctly. This is bank reconciliation.
To make this job easier Equity displays all bank transactions in date order. You then check all transactions off that are on your bank statement. You may need to enter some fees and corrections - this is explained in the following text.
Note : We can't stress heavily enough the importance of reconciliation. Don't put it off, do it as soon as you receive your bank statement.
When this option is selected the reconciliation screen will be displayed. No transactions will be displayed yet as you can select the bank account you wish to reconcile. To display the bank transactions either accept the default 1000 account by pressing [Enter] or enter another bank account. You can press [F2] to pop-up a list of accounts.
The reconciliation screen is shown on the next page.
All the transactions that have been posted to the selected bank account are displayed in date order. The cheque number or reference and the amount for each transaction is displayed. Debits are cheques or bank debits, Credits are deposits or bank credits. The box on the right-hand side displays various balances that are explained below. Pressing [Enter] on any displayed transaction pops up an information box that gives you more information about the transaction.
Once you have all the transactions listed on screen the best routine to follow is set out below.
Step 1 Make sure the opening balance displayed on the right of the screen is the opening balance on your statement. If it isn't you may have missed reconciling a statement, or the last time the bank account was reconciled the closing balance didn't match the bank closing balance. Go back and have a look at the last reconcile report you printed out.
Note : If this is your first bank reconciliation and your opening statement figure is wrong it is important you read the section on setting up your bank account on page 3.18 in the Getting Started chapter.
Step 2 The cursor is positioned on the earliest transaction. Using your bank statement, enter [Y] if the transaction has cleared (it appears on the statement) and [N] if it hasn't. The cursor will automatically jump to the next transaction. You only have to touch the [Y] and the [N] keys.
Note: Tick your bank statement as you clear each transaction. This allows you to see easily if any transactions have not been entered into Equity.
Step 3 If you discover an error in a transaction, e.g., $453.45 cheque amount entered into Equity and $435.54 on the statement, you can't edit this error directly - you need to enter the correction as a separate entry. Press [Ins] and you are able to enter another transaction to correct the balance. The above example would need a $17.91 journal credit to correct the balance as the cheque was made out for too much. The account to post the other half of the transaction to would be the account the original transaction was posted to. As you enter corrections they will be marked as cleared automatically.
Step 4 When you have ticked off all the transactions that appear on the screen AND on your bank statement you will probably still have some unticked transactions on your bank statement. These are usually bank fees, tax and missed cheques. To enter these press [Ins]. Fees and tax are bank debits. As you enter these they will be marked as cleared automatically.
Note : Remember to enter the correct date for each new transaction.
Step 5 Once all transactions that appear on the bank statement have been marked, the closing statement balance figure on the bottom right of the screen should equal the actual bank statement balance. If it does, press [F10] to reconcile the account. If it doesn't match, a mistake has been made. It is best to unmark all the marked transactions by pressing [Tab] and start again. Don't get too stressed out - it is easier the second time around.
Note : The closing statement balance on screen must equal the closing statement amount on you bank statement before [F10] is pressed.
Step 6 When you press [F10] you will be asked a couple of questions.
The first is basically asking you if you want to proceed with the reconciliation. The second asks if you want a reconciliation report. We advise you print the report as it can be invaluable if a mistake is made at a later date. It provides a printed list of all unreconciled cheques and deposits. Reconciliation reports should be field together in date sequence in a separate file for reference.
Bank reconciliations can be a harrowing task and this option will make your job much easier. The reconciliation screen also details uncleared cheque and deposit amounts and the current bank balance for your reference.