Bank Reconciliation

Bank Reconciliation is the process of comparing your company's financial records records with your bank statement to make sure they match. This is an essential financial accounting and control process that helps ensure the accuracy and integrity of a company's financial data. It helps find any mistakes or differences and fixes them.

The bank reconciliation process in Xoro begins by selecting the beginning balance. Once this is set up, you can proceed with setting up the beginning register balance and then reconcile the transactions.

Setting up beginning balances for the Bank reconciliation

When you migrate your books over to Xoro, for the first time you have to set a beginning bank statement balance and beginning account register balance in Xoro in order to start the reconciliation.

Generally, when you start the system, you’re beginning bank statement balance is Zero. This means that we have to upload the bank statement (one-line transaction) with the ending statement balance amount of your previous reconciliation.

It is important to note that this is the ending statement balance of your last reconciliation, not the Register balance of the bank account that shows on your balance sheet or trial balance.

For example, say you are moving the books into Xoro as of January 1, 2021. Then, in this case, you will enter the bank statement balance as of December 31, 2020, into Xoro. You can upload the bank statement in the "Upload Bank Statement" module. Here's what the bank statement data will look like:

Column Name	Data Type	Description	Example
**Date	MM-DD-YYYY	Statement Ending Date	12/31/2020
**Amount	numeric	Statement Ending Amount	50000.00
Description	Text	Memo	Opening Balance Entry

Setting up beginning register balance in Xoro

Register balance is the account balance shown on your balance sheet or trial balance. Generally, this balance is equal to the bank statement balance unless and until there are no outstanding checks and deposits.

If you have outstanding checks and deposits then, you need to create a Journal Entry (JE) in Xoro for ending bank Statement balance, outstanding checks, and outstanding deposits. The combination of these JE’s will add up to the register balance in Xoro that will exactly match with the register balance in your previous system.

The offset account for the JE is usually the “Opening Balance Equity” account.

Here are the Examples of JE for ending statement balance, Outstanding checks, and outstanding deposits. Again the point to be noted here is that we are trying to get to the same register balance that is In your previous system. The common mistake made here Is that If you create a single journal entry to bring the registered balance into Xoro without considering the ending bank statement balance, outstanding deposits, and outstanding checks altogether.

Say your Ending Statement Balance is $50,000, Outstanding Checks that didn’t clear the bank: $6000, Outstanding Deposits that didn’t get deposited in the bank: $5000

Register Balance: $50,000 – $6000 + $5000 = $49,000

JE 1: Bank Statement Balance

Bank Account | Debit | $50,000

Opening Balance Equity | Credit | $50,000

JE2: Outstanding Checks

Bank Account | Credit | $6,000

Opening Balance Equity | Debit | $6,000

Note: The outstanding checks entry can also be done through the outgoing payment module in case you want to record the actual Payment method and associated check numbers.

JE3: Outstanding Deposits

Bank Account | Debit | $5,000

Opening Balance Equity | Credit | $5,000

Note: The outstanding deposit entry can be done through the bank deposit module.

Reconciling the beginning bank statement balance with the beginning register balance in Xoro

Once the first two steps are done, then we are at the final step where we need to start the reconciliation process.

Here we will reconcile the Single line of bank statement upload to JE 1 in Xoro.

To start the reconciliation process, go to Menu > Accounting > Bank Reconciliation > Reconcile Bank Account

• Enter the Statement Ending Date (example 12/31/2020) and Statement Ending Balance (example 50,000)

• Click “Start Reconcile” to begin the reconciliation process.

• The left-hand side represents the bank transactions (if you have imported the bank statements) and the right-hand side represents the system transactions.

• Match the transactions and click on ✓ to confirm/reconcile.

• In case the system suggests similar transactions, select the correct transaction from the pop-up window and confirm.

• Continue with any remaining transactions.

• If all the transactions are correctly reconciled, the ‘Difference’ amount on the top right corner of the page will be 0 and the starting balance will equal the ending balance.

• Click "Finish" and a pop-up window will appear offering you to view a detailed report of your reconciliation.

Going forward, the beginning balance for this account will show the relevant balance (For example in this case it would show $50,000 as the beginning balance)

Important Note: The same procedure can be done for credit card accounts. The only difference between the bank account and credit card account balances is that as a credit card is a liability, the opening balance of a credit card will be entered as a negative balance both in case of bank statement upload (single line) and in case of Reconcile bank account where the ending statement balance is required.