15 Dec2009
Why I Cringe When I See “Reconciliation Discrepancies” in QuickBooks
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:
QuickBooks Reconciliation Discrepancy
- 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!
Tags: QuickBooks, reconciling
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Will
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It can also be a clumsy attempt at covering up fraud or theft.
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LYNNNYA
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Oh Dustin,
I hear what you are saying. Unfortunately, QB sales tax claimed one thing and the actual Tax form on dada.GOV was $.02 different. I know exactly what and why. However, I do have a recon discrep and do not know how to tax line map it. It is what it is and that is minor. I agree that any discrepancy needs to be identified and if warranted action taken to rectify. In this case, I do not believe it is worth the investment and is documented so as to leave no questions. I don’t want to expense if it is surplus and don’t want to income if it may be deficit. So what do I do? Balance sheet?
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Jeff Breeden
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Lynnnya,
Definitely not the balance sheet. It will never go away if you stick it there. QB calculates sales tax (and payroll tax) one transaction at a time. When you do the monthly (quarterly) report, it is common for the rounding to be off a bit. The correct number is what is calculated on the report, not the sum of the transactions. It should be adjusted to actual since that is the number a state auditor would use.
Think of the QB figure as a preliminary estimate.
Good luck! You are ahead of the game if you are reading Dustin’s blog.
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Lindsey
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My company’s “Quickbooks Support” contractor just added a $6,500 reconcilation discrepancy to our checking account and I cannot decide whether to leave it or delete it.
In short, I handwrite the AP checks and my boss’s wife records everything in QB based upon the copies of the handwritten checkbook pages. I am fully capable of just using QB (and do bookkeeping for my husband’s business), but this is how they’ve done it forever and don’t want to change. The “Quickbooks Support Expert” comes in to assist with adjusting the liabilities on a quarterly basis. My boss’s wife has never reconciled the accounts using the Reconciliation feature. The books have been over $3,000 off from the bank statements for years and I have no idea how to remedy it at this point. At the end of each year, I use the handwritten checkbook registers and a print out of the QB register to reconcile the accounts. After making the adjustments, I always get them within $1 of each other and adjust the checkbook if necessary. Again, we are not reconciled with the bank.
The QB support contractor decided it was time we reconcile in QB and reconciled a bank statement or two from 2011 and then hit Reconcile – adding a Reconcilation Descrepancy of over $6k. My boss is content with making sure that the checkbook and QB are reconciled yearly, knowing that there is an additional $3K or so (not $6k) in the bank.
Thoughts on this from a CPA? I briefly spoke to ours and he just ranted about unqualified QB support people…. Having a $6k adjustment on the books makes me nervous.
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Dustin Wheeler
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Lindsey,
I understand your concern and agree that $6K is a very large reconciliation discrepancy. I would not feel comfortable with it either. Whether or not it is worth going back several months (or years) to sort it all out is a tough judgement call. It sounds like it could be a lot of work.
I agree that bank and credit cards should be reconciled within QuickBooks. However, I think it should be done monthly as the statements arrive, not yearly.
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Michelle Edwards, CPA
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Hi Lindsey,
I also agree with you & Dustin that a $6k reconciliation discrepancy is concerning. If the books are off the bank statement by $3k, then I would assume the discrepancy entry would be about $3k. I also agree with Dustin’s comment that going back a year or several years to figure out the discrepancy could be a lot of work and is a tough judgement call.
Have you done your annual paper and pen reconciliation for the year yet? Perhaps you could determine where the $6k discrepancy came from and correct the QB account yourself.
I hate to agree with your CPA, but maybe it’s time to find a new “QuickBooks Expert.” Typically it’s more cost efficient to reconcile your bank account(s) on a monthly basis, rather than an annual basis. Personally, I think it’s a task that could be easily included with your quarterly QB tuneup work. A monthly bank reconciliation also works to your benefit if the bank is at fault on incorrectly posting a check/deposit. Most banks will only change/correct/update your account a few months back. Also, it’s less of a hassle to find that reconciliation discrepancy, resulting in more accurate books and fewer QuickBooks reconciliation discrepancy entries.
If you’re comfortable performing the bank reconciliation, you could do it on a monthly basis instead of an annual basis. Completing it by hand and on paper is fine, the biggest drawback is that QB won’t show that the accounts have been reconciled. This makes it tough to prepare a reconciled report for banks, tax preparers, or other outside parties requesting a copy of the bank reconciliation report.
Check with Dustin if his firm does this. Otherwise, I’d be more than happy to offer you a quote for quarterly QB tuneup work from our “QB Experts”. Best wishes!
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Elisa O'Brien
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I find that with very large reconciliations, that a daily reconciliation using the online banking. Check off the transactions and balance with the days balance shown. It doesn’t take long and you catch most mistakes while they are fresh and easy to find. The reconciliation is already done when the month ends.
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Jeanne
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We have an adjusting entry showing on the AP Summery Report. I assume it was created when a bank reconciling had a discrepancy. Now I have another discrepancy for the same value. Is there a way to get them to clear t zero?
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Linda
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If the reconciliation discrepancy account has been used and you then find what it was, can you simply do a general journal to correct it?
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Susie
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I was reconciling my account and was .05 off – went back in and found my error fixed it and it done and ok’d it not paying any attention thinking that all was good well
because it unchecked that check it made it that much more off. Is there anyway to go back into quick books and fix that error? HELP!!
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Sharon
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I am reconciling QuickBooks from 6 month’s ago. I got stuck and to reconcile gave a $80.20 in the deposit section. Is one discrepancy ok?
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Dustin Wheeler, CPA
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Sharon, I wouldn’t be OK with a discrepancy in my books, even if it was small. However, it’s ultimately up to you or whoever you’re doing the books for.
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Lana
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After payroll was recorded the reconcilliation showed the discrepancy and made an adjustment in journal entry in the amount of 2 uncashed checks. Next month checks cleared, but I still have – negative numbers of that amount. What do I do? Thanks.
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Pat
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I had to reconcile a bank account for two years, I was able to reconcile the checking to the penny, but the owner reconciled the credit card account before hand he said it was in balance but now I have an 80k+ reconciliation discrepancy showing, how do I fix this? I normally with other companies reconciled them together each month?
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Rachelle
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I just got hired as an office manager and while going through quickbooks reports I see almost $82,000 worth of reconciliation discrepancies. I have no idea what that means and need some input. The last person doing the books was a clueless kid and I think at some point in the last year things had gotten messy and they may have just started from scratch but I’m not sure. Any thoughts?
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Scott
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I have a question and am not sure if it can be fixed, when I started using quickbooks last year i put in all of my bank accounts, but there seems to be a issue with all 3 of my accounts, paypal, amazon and business accounts to the tune of about 18k or so. It shows more than what I actually have and am not sure what happened or how to make the adjustment to fix it for this year.
Not sure if it was because I was already running the company and did not purchase quickbooks till 1/01/15 and then tried to form the company with the balances at that time or if I just made a big error with all the accounts. Any help would be nice, the only fix i have is to start the company over, but i have so much inventory and adding it to the new company would effect the opening balance equity. Thank you
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Don
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If you use the Adjustment feature, which expense account does it go to? I don’t see a reconciliation expense account in the chart of accounts. Also, if you found the discrepancy and corrected it, wouldn’t the upcoming bank rec be off by the same amount and it would zero out the reconciliation expense account?
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Reginald
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Sorry, but if the transactions concerned expenses made on credit card. How can we make the necessary corrections ?
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