Now that you understand why you need to reconcile your accounts, let’s talk about which accounts you should reconcile. 

What is a Balance Sheet Account?

Before we dive in, you may want to read THIS PRIOR BLOG POST about the Chart of Accounts as a quick refresher.  Then come back here and we’ll pick up right where you left off. 

Balance Sheet accounts are one of the two major categories in your Chart of Accounts, and they work differently than the income and expense accounts you might be more familiar with.  Income and expense accounts reset to zero at the start of each new year (that’s how you end up with a fresh Profit & Loss report each January). Balance Sheet accounts, on the other hand, carry their balances forward year after year.  

Think about it this way: your bank account doesn’t magically empty itself on January 1st.  Neither does your credit card balance or the loan you’ve been paying down for the last three years.  

How do I know which Balance Sheet Accounts Need to Be Reconciled? 

Short answer: Most of them.  More precisely, all of the accounts that can be reconciled should be reconciled. 

If an account generates a monthly statement — whether you receive it in the mail, view it online, or have to track it down yourself — that’s your sign that it needs to be reconciled.

The most common examples are your bank accounts, credit cards, and any loans your business is carrying.

Your bank accounts are probably the most straightforward. Every transaction that flows through that account, whether it’s money in or money out, needs to be accounted for in your books. Your bank statement is what you’ll use to verify that.

Credit cards work the same way. Every charge, every payment, every refund needs to be reflected accurately in your accounting data, and your monthly credit card statement is your source of truth.

Loans are worth a special mention because they involve a little more nuance. When you make a loan payment, not all of that money is an expense. Part of it reduces what you owe (your principal balance), and part of it is interest (which is a real expense that shows up on your Profit & Loss). Reconciling your loan account makes sure both pieces are being handled correctly.

Which Accounts Can’t Be Reconciled?

Not every Balance Sheet account can be reconciled, and the reason is pretty simple: reconciliation requires a statement with a starting balance, an ending balance, and a date range. If that statement doesn’t exist, you can’t get past the first screen in QuickBooks — and that’s your signal that this account isn’t meant to be reconciled.

The most common accounts that fall into this category are Fixed Assets, Accounts Receivable, Accounts Payable, Sales Tax Payable, and Equity accounts.  Depending on how your Chart of Accounts is set up, there could be others.  

Fixed Assets is essentially a running list of the significant purchases your business has made. There’s no outside authority sending you a monthly statement for your equipment or furniture purchases, so there’s nothing to reconcile against.

Accounts Receivable and Accounts Payable are accounts that QuickBooks manages behind the scenes. Their balances are driven by customer invoices, invoice payments, vendor bills, and bill payments. You should never be coding transactions directly to these accounts, and QuickBooks doesn’t give you the ability to reconcile them anyway.

Sales Tax Payable and Equity accounts are a little different.  In the hands of an experienced outside bookkeeper, these accounts sometimes do get reconciled, but for the everyday business owner, they’re best left to the experts.

When Should I Reconcile?

Reconciling your accounts isn’t a once-in-a-while task, or a scrambling-in-March-to-get-ready-for-taxes task.  It’s a monthly process that should be performed like clockwork, driven by the fact that your statements arrive every month and your books need to match them to have accurate figures to start the new month. Whether you handle your own bookkeeping or have someone doing it for you, reconciliation should be a non-negotiable part of your month-end close. If you have a bookkeeper, reviewing those reconciliations is one of the best ways to verify their work and stay connected to the financial health of your business.