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Welcome everyone!
Today we are going to learn about completing a bank reconciliation using Xero cloud accounting software.
First a quick run through of bank rec for those only needing a refresher.
From the Xero dashboard
click the reconcile items button to the left of the bank account balance graph.
Notice we have the bank statement transactions on the left,
and the Xero transactions on the right.
If Xero matches to the bank transaction to the correct Xero transaction,
click the okay button between the columns and move on to the next transaction.
If necessary, type the correct coding under the create tab and proceed by OK’ing the transaction.
Before we learn the how of Xero bank reconciliation,
we need to learn the why.
Why is it a good idea to reconcile a bank account in Xero?
First let’s verify what reconciliation is:
to reconcile a bank account means we verify that the cash balance
in our Xero books is the same as the cash balance in our bank account.
If you have $100 in the bank, you need to make sure you also have $100 in cash on the Xero balance sheet.
If you aren't able to fully reconcile either Xero or your bank account,
you can investigate the problem and find out what went wrong.
You could have forgotten to input a transaction in Xero, the bank may have deposited, withdrawn, or transferred the incorrect amount.
Or your books may have had a transaction entered incorrectly.
Imagine you are a victim of identity theft and criminals are transferring funds out of your bank account.
If you reconcile often you would discover the unauthorized transfer and call your bank immediately to fix a problem.
If you want to fix errors in your bookkeeping before they become a problem, reconcile your books frequently.
Typically accounts are reconciled at the beginning of each month,
but with Xero, you can easily do it weekly or even daily.
Now that we know the why, let's talk about that how we do bank reconciliation Xero.
Now that we know the why, let's talk about that how we do bank reconciliation Xero.
Let's start by going to the dashboard for the demo company and take a look on the left-hand side:
the business checking account.
Below that is the statement balance.
This is the balance of our real-life bank account.
Below that is the Xero balance we are trying to match to her bank statement balance.
Looking at how overdrawn this amount is, I think there are many transactions that have not been added in Xero,
or have not passed through our bank yet.
Now, in our real-life Xero there may be a button called refresh feed which tells Xero to grab all the latest transactions from your bank.
Make sure to click this if it's there and hasn't been updated in a few days.
Let's get going let's click the reconcile items button and get started reconciling our bank account.
The first transaction we are going to look at is from Ridgeway University.
Now the bank transaction has this as invoice 35,
so Xero looks at that, but then also sees the amount of 6187 and then Xero has a transaction in its system for 6187 as well.
And so it's going to match those amounts and it's going to suggest that this is the transaction it matches against.
If that's correct we are going to hit OK and we are going to move on to the next transaction.
. If Xero doesn't know how to match a transaction we can then create it right here in the bank reconciliation window.
So for this transaction from Smart Agency for 4500, we can go ahead and start typing it.
It is a contact in our contacts already, and then I’m going to code this in 600 which is advertising.
I’ll put the description as a marketing campaign and then I'll go ahead and hit OK to reconcile that transaction.
Xero has this really neat feature we can also choose to discuss the reconciliation of a transaction with our accountant or bookkeeper.
If you don't know what to do with the transaction and you want to ask him about it later
they offer this a great interface for discussion and he can put your question in here and go ahead and save it with Ctrl-S
and then your accountant or bookkeeper will be able to see it on their end
and will be able to check it and then further discuss it with you or go ahead and fix it right then and there.
Another transaction I want to talk about is transfers between accounts.
So let's pretend that this transaction here for $2000 is a transfer from our savings account to our checking.
We then click the transfer button we see the associated savings account that's part of this demo company,
and we click it to say that we are transferring $2000 from this business savings account into the business checking account.
Once were are sure that's right we can click OK and that is reconciled.
That concludes our basics of bank rec in Xero.
Feel free to leave any questions or comments and I'll see you in the next lesson.