QuickBooks: Account reconciliation, Opening Balance Equity & Clearing Balance

 

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Q: How does one use the account Reconcile feature on quick books? How does one set up opening balance equity? How does one use clearing account before reconciling? A: As shown in the video....

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Relevant Material: "Account reconciliation ensures your QuickBooks matches bank records; Opening Balance Equity (OBE) is a temporary account for initial balances that should clear to $0, representing your starting money; while Clearing Balance (or Cleared Balance) is the running total of transactions already matched in reconciliation, confirming your QuickBooks activity matches the bank's cleared transactions, crucial for accuracy. 
Account Reconciliation
  • Significance: Verifies your QuickBooks balances (bank, credit card) match your official statements, catching errors, fraud, or missed transactions, ensuring financial reports are reliable.
  • Process: You compare recorded transactions (deposits, withdrawals) against your bank statement items for a period. 
Opening Balance Equity (OBE)
  • Significance: A temporary holding account for the starting balance of assets and liabilities when you first set up QuickBooks.
  • How it Works: When you enter your bank's starting balance, QuickBooks uses OBE to balance the entry; ideally, this account should have a $0 balance after setup because all old transactions are summarized in that initial figure.
  • Problem: A balance in OBE later means something was misposted or missed; it needs to be cleared by an accountant. 
Cleared Balance
  • Significance: Shows the total of transactions (deposits/withdrawals) that have successfully matched your bank statement during reconciliation, acting as a running comparison point.
  • How it Works: It's your beginning balance minus cleared withdrawals plus cleared deposits; it helps pinpoint discrepancies during reconciliation by showing what's been accounted for. 
In Summary
  • Reconciliation is the action of matching.
  • Opening Balance Equity is the starting point (should disappear).
  • Cleared Balance is the running total of matched items during reconciliation. .." (Google) 
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