You’re near the end of a long and busy day, reconciling your bank account in QuickBooks. You’ve checked off every deposit and check from the bank statement and thought you were done, but the bottom right corner of the reconciliation screen says “Difference: $20.00.”
You need to hurry to make it to a dinner appointment, so you click on the “reconcile now” button anyway, and the following box appears:
You’ve cleared dozens of transactions totaling several thousand dollars, so a discrepancy of $20 is too small to be worth correcting, right? So you click on the “enter adjustment” button, QuickBooks automatically creates a $20 transaction to Reconciliation Discrepancies expense, and congratulations, you’re done reconciling!
Maybe you just missed recording a $20 bank charge in the books. In this case, the adjustment for the discrepancy is inconsequential. However, just because a discrepancy is small, it doesn’t mean it is not worth investigating. Below are a few examples of what could have caused the discrepancy that might make you glad you looked into it further:
- You deposited $20 from a customer in your bank account, but forgot to record it in your books and missed it while reconciling. The customer gets upset when he/she is invoiced again and claims that the bill was paid, but you have no record of receiving the payment.
- A bank error takes $80 out of your account, but the original check was for $60. In your haste of reconciling, you didn’t catch the difference in the amounts. If you discover the error, you’ll probably get $20 added back to your account (plus, you’ll score some points with the boss).
- You missed an unrecorded $1,000 deposit from a customer and an unrecorded $980 fixed asset purchase. You might think that missing two large transactions that somehow happen to net out to a small amount would be very unlikely, but I have seen it happen many times!
You never know why reconciliation discrepancies exists. That’s why I cringe when I see them.
When you have a reconciliation discrepancy, you can’t blame the bank or QuickBooks. You can only blame yourself for making a mistake in the reconciliation process. You can blame your perfectionist accountant for telling you to start over and do it again, but you might thank your accountant for it later.