How to reconcile accounts

1. How to reconcile accounts February 17, 2022 When it comes to reconciling accounts, there are a lot of people who feel overwhelmed and intimidated. They think it's a difficult process that only accountants can do. But that's not true! Anyone can reconcile their accounts with the right tools and knowledge. In this blog post, I'll show you how to do it yourself in just a few simple steps. Stay tuned. The first thing you need is a spreadsheet with the transactions from both sides of your ledger. In my example, I'll use a bank account and a cash box. If you're not sure how to track your transactions, read this post: " How to Set Up A Simple Accounting System ".

2. You can see that there's one transaction missing in the cash box – it's an advertisement for something that doesn't exist – and two missing ones in the bank account: 123 and 321. Let's start by finding out what happened to those three transactions. Let us begin by finding out if we have any clues on what those unknown transactions could be based on our other entries. We can look at some examples here: 123 - This has got to be the purchase of a new printer. We know that we had 500 in cash and we spent 10% on buying printers with the remaining 450, so it's pretty safe to say that our entry for 123 is this: 315 – This has got to be the deposit Tania made at her bank. We know she usually makes a transfer of 200 every week, which means this one is also highly likely: 321 – The rent money was always paid by cheque and since there aren't any other cash entries apart from those already included in our spreadsheet, it most likely refers to the rent as well: So let us put all this together and see what we have now: We can now look back the original spreadsheet and see if we can make any sense of it. We still have three unknowns which need to be found out somehow, but the rest of it seems fine. Whenever you get stuck during aaccount reconciliation softwareor when there are missing entries, always go back and see if you can find clues that help identify them somewhere else in your records. Let us look at the first one: It has been transferred in twice and each time we're left with 10 extra bucks in cash than we had before. The only possible explanation is that it's a repayment of 10 dollars Tania owes me for something she bought from my shop when I was away on holiday so long ago. So this would be my entry: And about 320? It turns out they stand for an unknown amount of money that my friend needed to borrow and I was more than happy to give it to him – so the transaction goes like this: Now we can finally see how much we actually have in cash and how much left over is worth something else. Here's what we get: And now let us look at our bank account:

3. What looks odd here? Yes, you're right! It's those two entries showing up with the same date which could only mean one thing: they're both transfers from Tania. She paid me back twice for her printer (the amount includes a small interest as shown). Now that we know all the missing transactions, let us put them together and see if we can find out where those weird zeroes came from: Oh, I see now. What happened was that when Tania transferred me back the money she owed me for getting her printer, she must've forgot to change the date on the spreadsheet so it turned out as if she had paid for another one – hence the two transfers having the same date. And then my friend gave me some cash and accidentally wrote down January's date instead of February which is why he transferred it in twice. Well, at least now we know what happened. :)