EOY Reconcile Accounts

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1 Purpose of Reconciling Bank Accounts We need to reconcile our accounts to prove and document that an account balance is correct. By reconciling each transaction to the bank statement it ensures the accuracy of the business records. Bank Accounts can include the following: Banks Credit Cards Barter Cards Bank Loans Petty Cash Cash Drawer PayPal Clearing Accounts (see below for details) Reconciling Bank Accounts EOY Reconcile Accounts 1. If using bank feeds, ensure all transactions are allocated from the bank feed screen before reconciliation. 2. If using bank feeds bank balance to reconcile: - EOY-Reconcile Accounts (April 2017) The Institute of Certified Bookkeepers Page 1

2 3. Reconcile Banks to 30 June even if the last bank statement date is after 30 June. 4. Review and clear, if possible, unpresented deposits and withdrawals. For unpresented cheques, follow up and cancel any that are 6 months and older. Once you have established a reason for the unpresented transaction you should fix it or make a note for accountant. Note the transactions should not be deleted but reversed in the current BAS reporting period. 5. Reasons for unpresented amounts may include: Entered a cheque or EFT twice. Tried to remove an outstanding debtor by recording a customer payment, may have credited the transaction instead. 6. Provide accountant and client a printout of the bank 30 June and a copy of last bank statement for all banks. Reconciling Foreign Banks Fluctuations in foreign currency exchange occur throughout the year and therefore a currency exchange rate adjustment is required to bring the Foreign Banks in line with the exchange rate at 30 June. This is known as an unrealised gain or loss. 1. For example: The USD Foreign bank currently has an exchange of or 1.17 but the rate at 30th June is 0.80 or 1.25, therefore the balance sheet would show as follows: Foreign Banks USD Bank Account $9, USD Bank Account Exchange $1, Total Foreign Banks $11, General journal description at 30 June Bringing in USD 0.80 or 1.25 rate of exchange. Account Debit Credit Tax USD Bank Account Exchange $ No Tax Currency Gain/Loss $ No Tax New Balance Sheet figures Foreign Banks USD Bank Account $9, USD Bank Account Exchange $2, Total Foreign Banks $12, Reconcile Credit Cards EOY-Reconcile Accounts (April 2017) The Institute of Certified Bookkeepers Page 2

3 1. ONLY Business Credit Cards should be shown on the Balance Sheet. 2. Reconcile each Credit Card as per normal bank. 3. IF personal transactions involved, allocate to loan account of directors. Reconcile Petty Cash 4. Reconcile Petty Cash to the float stated or to zero 5. Petty Cash can also be used for CASH expenses by director/owner, ensure to clear back to owners drawings/loan account Reconcile Barter Card 1. Barter Cards are used for both Purchases and Sales in a barter deal between clients and suppliers. 2. Ensure ALL transactions have been processed to 30 th June REGARDLESS if not on barter card statement and leave these transactions as unpresented Reconcile PayPal What is PayPal? PayPal is a tool used by many industries for both receiving income and purchasing goods and services online. It is a secure way of paying and receiving funds and can be linked to an existing bank account or credit card. When you use PayPal your banking details are not actually shared with the other entity, basically PayPal lets you send money to accounts and your bank or credit card details are not given out. PayPal acts as the holder of the money and through its policies and practices earns the trust of both parties who then entrust PayPal with their bank and credit card details. All that is needed to send or receive money through PayPal are a valid and/or bank account/credit card. Bookkeeping Process In the accounts PayPal is setup as a bank account within your software. It operates the same as any other bank account and as such needs to be reconciled back to the PayPal statement. Create New Account Create a new asset account setting it up as a bank account called PayPal. If you have an opening balance enter this balance otherwise leave as $0.00. You will then pay or spend money from this account when selling or purchasing online the same as you would with any other bank account. Money can also be transferred back and forth from other bank accounts. The bank account you wish to use with PayPal are set up within PayPal and as such linked. Reconcile PayPal Account EOY-Reconcile Accounts (April 2017) The Institute of Certified Bookkeepers Page 3

4 Login to your PayPal account online and your opening screen which will give you a summary allowing you to perform the transactions as you need to. (See example 1 below) To reconcile the account, you need to print out the All Activity With Balance account as this gives you a running balance on the account. To do this go to the left hand bottom corner under view transactions select the All Account Activity. This will take you to a screen showing all the activities, select the second tab across which says All Activity (with Balance) this will then bring up a bank statement similar to a standard bank account which will allow you to reconcile as per normal. (Example 2) Reconcile to PayPal Statement Example 1 Example 2 EOY-Reconcile Accounts (April 2017) The Institute of Certified Bookkeepers Page 4

5 Multi Currency in PayPal As you can see from the statement above, PayPal will show you the currency of the country you have bought from and convert it into the Australian dollar amount. When the purchase was made for Facebook it was paid in USD. When you click on the details button you can drill down to actually get the conversion rate on the day. (See example 3 below). Therefore, if you are utilising multicurrency with your debtors/creditors you are able to use this statement to show the foreign currency on the day and report on your gains and losses within your balance sheet. Example 3 Reconcile Clearing Accounts Clearing accounts may include: Payroll Clearing POS Clearing Electronic Clearing Undeposited Funds Contra EFTPOS All these clearing accounts need to be reviewed at an end of year to ensure the remaining balances can be explained. Ideally these accounts should be zero but there are occasions where the remaining values are valid. These occasions include: EOY-Reconcile Accounts (April 2017) The Institute of Certified Bookkeepers Page 5

6 1. Electronic Clearing Funds not transferred to bank until new year. 2. Electronic Clearing Reversal of a payment THESE NEED TO BE CLEARED. 3. Undeposited Funds Funds not transferred to bank until the new year; recommend to bank the deposit before end of June. 4. Undeposited Funds Incorrect postings THESE NEED TO BE CLEARED. 5. Payroll Clearing This should be ZERO. ALL wages should be banked and CLEARED. 6. POS Clearing This should be ZERO as any rounding values post to Unders/Overs. 7. EFTPOS EFTPOS payments generally will be paid to the business bank within 2 days of the processing the sale. Therefore, in most cases you should be able to reconcile EFTPOS by viewing at 30 June the last few days of EFTPOS payments in June and check that the payments hit the bank in early July. Alternatively, you may be required to estimate the EFTPOS value due to the bank grouping transactions. Recommend viewing the EFTPOS transaction banked in early July and compare to the value remaining at 30 June. EOY-Reconcile Accounts (April 2017) The Institute of Certified Bookkeepers Page 6