“My bank account is connected to QuickBooks, so I don’t need to reconcile my bank statement. I know everything’s there,” Sheri said matter-of-factly.
Katie had reviewed Sheri’s QuickBooks file and noticed some unusual stuff happening. Her deposits were getting recorded twice – which was doubling the amount of income she was reporting. If this didn’t get resolved, Sheri was going to end up paying nearly DOUBLE what she should in taxes.
“Sheri, the bank feeds are great, but they’re not perfect,” Katie replied. “You should still be reconciling QuickBooks to the bank statement regularly to make sure QuickBooks is accurate. Right now, if we don’t get this fixed, you’re going to overstate your net income by almost double – which means paying nearly twice as much in taxes.”
“Oh no! Is this something you can fix for me?” Sheri inquired.
“Absolutely,” Katie smiled.
Bank reconciliations are just a fancy way of saying you’re going to compare your records to what was recorded at the bank. It helps make sure you didn’t duplicate or forget any deposits or expenses. In fact, if you ever get audited by the IRS, they typically start with looking at the bank statements. So if you’ve been comparing to those on a regular basis, it will help put your mind at ease if the IRS ever come knocking on your door.
Do you reconcile your bank statement regularly?
Do you have an accounting question you would like answered? Submit a question here and it could be featured in an upcoming blog post!