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What is Bank Reconciliation?

By October 28, 2013 No Comments

One of the most frequent questions we hear from our customers is, “What is bank reconciliation?”

And if you are new to the world of accounting then there is a pretty good chance that you do not know either. But it’s OK! Kashoo is here to help!

At a basic level, bank reconciliation is a correlation between what shows up on your bank statement and what you have recorded in your accounting software.

Why does this correlation matter, you ask? Well, if there is one pure truth in accounting it’s that errors happen. Invoices get forgotten. Deposits get lost. Any number of things can (and will) happen. Bank reconciliation adds a valuable layer of error detection and provides you the ability to correct those errors in your accounting system. Doing a monthly bank reconciliation will help prevent these accounting errors and build your confidence in your bookkeeping abilities.

So how do you start? As mentioned, on a monthly basis, take your bank statement and match the transactions listed against the records in your accounting software. If something does not match up or is in one but not the other then you know something is amiss and can take the appropriate actions to rectify the situation.

That doesn’t sound so bad, does it? Well, it’s even easier in Kashoo…

Performing a bank reconciliation by importing your data into Kashoo

So how do you import bank or credit card transactions? There are two options:

Option 1 – Bank Feed

The easiest option for importing bank transactions is by setting up a bank feed. This is where Kashoo talks to your bank on a daily basis behind the scenes, bringing in the latest transactions from your bank.

Option 2 – File Upload

You’re also able to upload a file. If you have a lot of historical bank transactions to import, you may need to upload a file as the maximum amount of data a bank feed can usually import is 30 to 90 days.

We recommend uploading an OFX (Microsoft Money), QBO (QuickBooks), or QFX (Quicken) file downloaded from your online banking.

Some banks may not provide the file formats listed above. If this is the case for you, then Kashoo can also import CSV, Excel, or QIF files.

Note: If you’re unable to import bank transactions, you can still perform a reconciliation. Please scroll down to the section on Performing a Traditional Bank Reconciliation to learn how. 

Once you’ve either set up a bank feed or uploaded your bank transactions, this is how you perform a reconciliation.

Assuming that your bank statement transactions are imported:

1. Go to the Banking page.

2. Select the Account you want to reconcile and the Statement Date, which is the date that you want to reconcile your books up until. If you have many months of transactions to reconcile, we recommend only reconciling one month at a time.

By selecting the Account and Statement Date you’ll see your transactions appear below.

The transactions are divided into two sections:

  1. The top section contains transactions found in your bank statement. These contain Imported Transactions
  2. The bottom section contains transactions entered into Kashoo. These contain Transactions Entered in Kashoo.

Your goal is to use the Imported Transactions in the top to either create new transactions, or match them to Transactions Entered in Kashoo.

Accepting a Match

If there’s a potential match between the Imported Transactions and theTransactions Entered in Kashoo, you’ll see a suggested match. To accept the match, you simply check off the box.

If there’s no match found you’ll have the chance to add or remove a transaction.

Adding an Expense

By clicking on Add Expense, you’ll be able to fill out the Supplier, and Account fields and add the transaction. If you have Sales Tax, Memo or Project to add, you can do that if you like, but it’s not necessary to choose those fields.

Adding Income

By clicking on Add Income, you’ll be able to fill out the Customer, Account fields and add the transaction. If you have Sales Tax, Memo or Project to add, you can do that if you like, but it’s not necessary to choose those fields.

Adding a Transfer

By clicking on Add Transfer, you only need to choose the Destination Account to transfer the funds with. You do have the option to add a Description and Currency , but it’s not necessary.

Removing a Transaction

If you ever happen to end up with a duplicate transaction in your list of Imported Transactions, removing it is as simple as clicking on the Remove from Bank Statement checkbox.

Saving the Reconciliation

When all your bank statement transactions are matched to your entered transactions, you’re ready to save the reconciliation. To do so, scroll down to the bottom of the page and click on Add Statement

You will immediately get taken to the Statement you just created. To get back to your list of Saved Statements scroll to the bottom and hit Back

Performing a bank reconciliation without importing your bank data into Kashoo.

1. Choose your Account and Statement Date.

2. Check off the boxes next to the entered transactions that match those found on your bank statement.

3.Once you’ve verified that the Closing Balance matches the one found in your bank statement, click on Add Statement.

Phew! If you’ve made it this far, there is a good chance that you know something about bank reconciliation, and how to perform it in Kashoo. As always, feel free to contact us with any questions: answers@kashoo.com, @KashooOnline, 888-520-5274.

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