QuickBooks Reconciliation Beginning Balance Is Wrong

Why is my QuickBooks reconciliation beginning balance wrong or different from the statement?

The beginning balance is usually wrong because something changed on an item that was already reconciled, or the opening balance was wrong from the start. QuickBooks Online builds it from the entries marked R for reconciled (vendor help). The vendor lists these causes (vendor help):

• an incorrect opening balance entered when the account was created;
• a reconciled transaction that was edited, deleted, voided, moved or unreconciled;
• a categorized bank-feed transaction that was undone and sent back to Pending;
• a transaction marked reconciled by hand, outside a reconciliation.

The cause is usually a past entry, not the new statement. To see which one it is, open the Reconcile Discrepancy Report; the steps are in the next section. The IRS advises reconciling the business checking account each month, and says computerized records must reconcile with the books and the return (Publication 583). The software steps here come from the vendor's own help pages. They describe the product, not a tax rule, and menu names change.

The case is simple when the report names a few items, they sit in a period not yet filed, and restoring them brings the difference to zero. It is not simple when:

• the gap is in a year whose return is already filed;
• many items changed at once, or the report does not add up to the gap;
• someone deleted or voided items during a clean-up and nobody knows why;
• the books still disagree with the statements after you follow the report.

Gather before you start:

• the exact amount the beginning balance is off by;
• bank and card statements since the last reconciliation that matched;
• the saved reconciliation reports for those periods;
• the change history (audit log) for the account;
• the filed return for any year the changes touch.

How do I find which transaction changed, who changed it and when?

Open the Reconcile Discrepancy Report. Its What happened column shows what changed, when and who changed it. You need admin access to view and edit reconciliations (vendor help).

1. Write down the exact amount the beginning balance is off by. The changes you find should add up to it.
2. Go to Reconcile and choose the account. At the beginning-balance alert, select We can help you fix it.
3. Work down the report one transaction at a time. Review in tray shows the details; View History beside it shows the transaction's full history.
4. Apply the suggested fix, or correct it from your own records.

If the report is clear but the balance is still off, two kinds of change do not show there. For deleted or voided transactions, open the Audit log and filter to the account and the period since the last completed reconciliation. For entries marked reconciled outside a normal reconciliation, open the account register from the chart of accounts, filter by reconcile status and look for R entries that no completed reconciliation accounts for.

The balance is fixed when the Total discrepancy difference shows zero, the changes you found add up to the amount you wrote down, and the beginning balance agrees with the statement. A zero total alone does not prove it, since the report may miss some changes. Then reconcile the period: the IRS says the adjusted statement balance should equal the adjusted checkbook balance (Publication 583).

How do I fix an edited, deleted, voided or unreconciled transaction?

Fix the item the report names, and put it back as it was unless the change was correct. These are the vendor's fixes for each kind of change (vendor help):

A change someone made on purpose is not automatically a mistake. Ask who made it and why before restoring it. If the change was correct, restoring it is the wrong fix: the books and the statement then differ for a reason that needs a decision. The vendor says to check with your accountant when a correction touches a reconciled period or the opening balance and you are not certain.

If a closing date covers the period, each edit triggers the warning or password prompt (vendor help). Note the date before you move it, and set it back afterwards.

Why didn't reconciling again fix the beginning balance?

Because the beginning balance comes from past entries, not from the new statement. The software checks it first each time you reconcile, and it is the total of the entries marked R (vendor help). Starting another reconciliation reuses that same total, so the gap stays until the changed entry is restored or the earlier reconciliation is undone.

Forcing the new reconciliation to close with a balancing entry makes the totals agree but does not say what changed.

Can I undo a reconciliation, and when is redoing the period cleaner?

Yes. The vendor says the primary admin or the accountant can undo a reconciliation from the History by account screen, and gives no further steps (vendor help). Check on screen whether you can undo one reconciliation or only the latest. Undoing removes that reconciliation, so each period you undo must be reconciled again against its statement. Undo only back to the last period that matched its statement, and not into a filed year without your accountant. Save the existing reconciliation reports first so you can compare before and after.

Whether to repair one item or redo a period is a judgment call, not a vendor or IRS rule. A practical test:

What if this is my first reconciliation and the opening balance was entered wrong?

On a first reconciliation the opening balance should be the only reconciled entry, so a wrong beginning balance usually means the opening entry is wrong, or another entry was marked R by mistake (vendor help). Check the opening entry first:

1. Open the account's register from the chart of accounts. Find the entry with Opening Balance Equity in the Account column, and note its date and amount.
2. Compare it with the bank or card statement balance for that same day. For a card, that is the amount owed.
3. If they differ, edit the amount and save.
4. The opening entry should show R. Every other entry should be blank or marked C (cleared). Clear any other R that was marked by mistake. If an earlier reconciliation really exists, undo it instead of editing the opening entry.

The other side of the opening entry sits in Opening Balance Equity, the account that offsets a starting balance. Clearing it has its own guide: Opening Balance Equity.

Should I accept the difference and let the software post an adjustment?

Usually not. At the end of a reconciliation the vendor lets you finish and accept a difference you cannot find, and the software creates a journal entry that adjusts your books by that amount. The vendor says to talk to your accountant first and that it is usually best to resolve differences instead (vendor help). Its page does not say which account the entry posts to, so find the entry afterwards.

The entry makes the totals agree but does not say what changed. If the cause is a changed transaction, it stays changed, and in a filed year the books can drift from the return. Whether to accept a difference is a decision for you and your accountant after the report, the audit log and the statements are exhausted; write down why.

What if the change landed in a year that is already filed?

A filed return stays as filed until it is corrected, by an amended return or, for a partnership under the centralized partnership audit regime, an administrative adjustment request (IRS). Before you restore or redo anything dated in a filed year, save the current reports, compare that year with the filed return, and decide with your accountant.

Check each change's date in the audit log against the date the return was prepared. An edit made before the return may have been used by it, so restoring the item moves the books away from the return. A mistaken edit made after the return is different: restoring it brings the books back to the return. A correct change leaves the books and the return apart, and someone must decide whether a return item changed.

A change to an income or expense account can move the return: for an individual, the IRS lists a change in income, deductions, credits or tax liability as a reason to amend (IRS). A change that touches only a balance sheet account, such as the opening entry on a new card account, may not move a sole proprietor's return. A corporation or partnership that completes Schedule L, the balance sheet on its return, can be affected too: the instructions say those balance sheets should agree with the books and records (Form 1120, 1120-S and 1065 instructions).

Correcting a math or posting error is not a change in accounting method and needs no IRS approval. A consistent way of timing an item can be a method, and changing a method generally needs approval on Form 3115 (Publication 538).

Which form amends each kind of return, the time limits and locking a filed year: closing date after taxes are filed.

How do I stop reconciled periods from changing again?

Set a closing date with the password option, limit admin access, keep the change history and reconcile every month.

• Closing date. A closing date makes the software warn, or ask for a password, before anyone changes a transaction on or before it (vendor help). The steps, the two security options and who should hold the password: closing date after taxes are filed.
• Admin access. Admins view and edit reconciliations, so consider giving admin rights only to people who need them.
• Change history. Keep the audit log. The IRS says the documentation of a computerized system must show the controls used to prevent unauthorized addition, alteration or deletion of retained records (Publication 583).
• Monthly reconciliation. A break then shows within a month. A connected bank is not a reconciliation: bank feeds are not reconciliation.

Example

These examples are illustrative; the amounts are in US dollars.

One deposit edited

The beginning balance shows US$41,250 and the statement shows US$39,800, a gap of US$1,450. The Reconcile Discrepancy Report lists one March deposit changed from US$3,950 to US$5,400. The difference is US$1,450, so it explains the whole gap. Assume March is in a year not yet filed and the March statement shows US$3,950. The owner checks who made the edit and why, then Review in tray restores the original amount and the difference falls to zero.

Three reconciled checks deleted

During a clean-up a bookkeeper deletes three reconciled checks totaling US$2,100. One check is dated in a year already filed, so before anything is restored the accountant compares that year's books and records with the filed return and confirms why each check was deleted. If the deletions were mistakes, restoring the checks, or recreating them with their original dates and amounts and marking them reconciled, should then clear the report.

A new card account

A first reconciliation of a new card account shows a beginning balance of US$0, while the statement shows US$6,800 owed on the opening date. The opening entry was entered as US$0. Correcting that single entry to US$6,800 should fix the beginning balance when no other entry is marked reconciled, and the Opening Balance Equity side moves with it.

Different for you?

• The difference is in a filed year, many items changed at once, or the books and statements still disagree after you followed the report: get bookkeeping help to settle which periods to redo, whether any filed return needs amending, and how to lock the books afterwards. Bring the statements, the reconciliation reports, the change history and the filed return.
• Owner's equity no longer matches last year's return: see retained earnings that don't match last year's return.
• You moved from QuickBooks Desktop to Online: see balances off after the move.
• You changed accountants or software and the opening balance came from old reports: see opening balances after changing accountants.
• A bookkeeper's clean-up changed reconciled items and you cannot tell why: see checking your bookkeeper's work.
• A bank feed stopped and months are missing: see bank feed stopped importing.
• The books are months behind: see catching up on overdue books.