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What does it mean to reconcile an account?

The three goals of reconciling your account register are:

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Listed below are various reasons why you and the bank might not have the same transactions. Some of these are a normal part of using a bank account, while others represent mistakes made by you, Quicken, or your bank.

Normal

You have outstanding transactions such as checks that haven't been cashed, or deposits that have been mailed or scheduled but haven't yet been processed at the bank.

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You don’t have all of the transactions that the bank has, because you chose not to enter transactions before a certain date, e.g., the date you started to use Quicken. A similar issue can occur when the bank limits the time span you can download transactions for, such as a ninety-day limit.

Mistakes

You are missing a transaction that the bank lists because you forgot to enter the transaction in your register.

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You are missing transactions or are not matching transactions, because the bank made an error.

Downloading and reconciling

Some of the mistakes listed above will not occur if you download your transactions from your bank. In fact, if you download transactions and never hand-enter a transaction, then the only mistake that can be made is one by the bank. You may trust your bank enough that you feel no need to reconcile your accounts.

The reconcile process

Let’s start with a new account as an example.

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We select (clear) the transactions listed on the statement. They should total -$300. When added to the reconciled total, we achieve $3,200. Upon completing the reconciliation, the cleared transactions are marked as reconciled.

Opening balance adjustment

The above scenario describes reconciling for every month after we open the account at the bank. Now let’s look at the case where we opened the account a long time before we started using Quicken. We might choose not to enter all the transactions older than a certain date. How will our transactions ever add up to the same as the bank if we don’t have those older transactions? The answer is that we insert an adjustment transaction. This adjustment transaction has an amount that, when included in the total, will add up to the bank’s total. It will be marked as reconciled at the end of the reconciliation. By doing this we have reconciled transactions that add up to the bank’s balance.

Errors and adjustments

Sometimes when you’re reconciling, finding and fixing mistakes like those listed above may be more work than you feel it’s worth. For example, let’s say that you’re working with an account whose balance is $10,000 and you find that you are off $1.28. Will you spend what might be a long period of time to account for $1.28? If the transactions that are reconciled or cleared don’t add up to the bank’s balance, Quicken can insert an adjustment transaction with an amount such that, when added to the total, equals the bank’s balance. This adjustment will be marked as reconciled at the end of the reconciliation and, again, we have reconciled transactions that add up to the bank’s balance.

Bank errors

The reconciliation process may uncover errors that the bank has made as well as your errors. Let’s look at an example:

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