I’m often asked, “how do you establish the ‘QuickBooks opening bank or credit card balance’ when the balance is something other that $0?

This situation occurs when a business has operated in the past, perhaps has filed a prior year tax return, but is just beginning to use QuickBooks and does not desire to capture the prior year(s) transaction activities.

Follow the steps outlined below carefully and you will succeed in properly establishing your QuickBooks opening balance:

What you will need:

• Your bank or credit card statement, ending January 31st (or a date very close; i.e., 29th, 30th). NOTE: Credit Card statements typically do NOT end on the last day of the month. Therefore, you will want the first January statement.
• An understanding of what hard checks, debit card transactions, deposits and credit card transactions (if you are reconciling a credit card) were written, deposited or charged in the prior year but did not clear until January (or later). Read that last sentence again very carefully. Again, you are only interested in those transactions (hard checks, debit card transactions, deposits or credit card charges) in which the transactions occurred last year but did not post/clear until January or later.

The Steps:

1. Enter ALL hard checks, debit card transactions, deposits or credit card transactions from the prior year, but only those which did not clear until January (or later), dating them on the date the transaction actually occurred. This date WILL be a date in the prior year. This step will give you a partial bank balance.
2. Go to the QuickBooks reconciliation screen (click on “Banking”, “Reconcile”). Ensure you have the proper bank or credit card account displayed. The “Beginning Balance” will be $0.
3. The Statement, Service Charge and Interest Earned dates should be set to December 31st of the prior year. In the case of a credit card, set these dates to the ending dates of your last December statement.
4. In the “Ending Balance” field, type in the Beginning Balance found on your bank or credit card statement. Remember, we are working to establish the QuickBooks opening balance, in this case, for the month of January. In the initial reconciliation, we will NOT clear ANY transactions on the January bank statement. This will occur after we have reconciled and established a QuickBooks opening balance which reflects your bank’s opening balance.
5. Click “Continue” to continue with the reconciliation process. Assuming your opening balance is a positive number, you will make a Journal Entry debiting the bank or credit card account and crediting your Retained Earnings account. NOTE: It is highly unusual to post ANYTHING to the retained earnings account but this is an exception to this rule.
6. To make the journal entry, click on “Company”, “Make General Journal Entries”.
7. Date the journal entry for December 31st of the prior year.
8. Make sure the “Adjusting Entry” is NOT checked.
9. Under “Account”, enter the bank or credit card account you are reconciling.
10. Next, in the Debit column enter the Beginning Balance on your statement. This is the same balance you entered earlier in the reconciliation screen window for Ending Balance.
11. In the Memo column, type in something like “To establish account opening balance”.
12. Now, go back to the “Account” column below the entry line you just made. Type in the account number for “Retained Earnings”.
13. The credit column should already contain the same number you entered earlier in the debit field for your first line. Do NOT change this number. The Memo column should read the same as the first line.
14. Click on “Save & Close”. When you see the screen below, click “Ok”.
15. Now, return to the reconciliation screen. Within this screen you will see an entry as the result of the journal entry you just made. It will be on the right hand (deposit) side.
16. Click on the “Check Mark” column to place a check mark in this column, therefore “Clearing” this transaction. Afterward, you will see in the right bottom portion of the reconciliation window that the difference will reflect 0.00. If not, something has been missed above. If the difference is 0.00, click on “Reconcile Now”.
17. When prompted, click on “Summary” and then “Print” to print a summary reconciliation report.

That’s it! Now you can reconcile each subsequent month because your statement’s opening balance will now match QuickBooks’ opening balance.

Is something not real clear in your mind regarding the above? Got a QuickBooks question for QuickTrainer? Send us an email at info@quicktrainer.biz or call us: 910-338-0488. We'll be more than glad to help you!

#ILM