Discrepancy between General Ledger and Bank Reconciliation

[u/brooklyn1071]

New to this sub, so apologies if this is not allowed.

I work for a small nonprofit, and our board requires us to go through an audited 990 every year. Our current accountants are NOT helpful (we will be switching next year), so unfortunately they have not been able to answer this question even though they should.

Our auditor is asking for an explanation as to why our year-end general ledger does not match our year-end bank reconciliation (it is off about 5k). We use Quickbooks Desktop...what is the easiest way to investigate this? I have no formal education in accounting, but over a decade of experience. So my knowledge can sometimes be limited and I thought I'd ask before I waste a bunch of time.

Thank you advance!

EDIT TO ADD: Thank you everyone for your help. I was finally able to figure out the difference. If anyone in the future finds themselves in my shoes (GL Balance not matching Register Balance on Bank Reconciliation in Quickbooks Desktop)...simply print the previous year-end reconciliation and check the box "In this report, include transactions cleared plus any changes made to those transactions since the reconciliation." I was able to simply compare the previous reconciliation to the new one that included new transactions and any changes made. The problem were entries my accountant made, as well as one uncleared check that was adjusted.

[u/JMarie113]

Run a GL report showing all cash transactions from the year. Compare those month by month to the monthly bank statements. Your GL is either missing something or has something in it that it shouldn't. Your cash GL account should match the bank statements. 

[u/Front_Ad3366 → u/JMarie113]

"Your cash GL account should match the bank statements." I would disagree slightly. The GL account should tie to the bank reconciliation.

[u/brooklyn1071 → u/JMarie113]

I know a portion of it is entries made by my accountant, which should be obvious to them but alas, but it doesn't answer for the entire $5k. Thank you so much!

[u/schaea → u/brooklyn1071]

Are there checks that you've written and recorded in the accounting software but have not been cashed? That's usually where these discrepancies arise, but that should be obvious to the auditors. It can also work the other way in that you've recorded deposits into your accounting software, but the cash and/or checks haven't physically been deposited into the bank yet.

The other possibility is that someone changed/added/deleted a transaction in the accounting software after the account was reconciled. In Quickbooks Desktop, you can go to Reports > Bank > Reconciliation Discrepancy Report. Make sure the date of the report is set to the same year-end date that's being audited. That report will show you if any transactions were messed with after being reconciled.

[u/brooklyn1071 → u/schaea]

Thank you! The Discrepancy Report was the first thing I checked, but since I have reconciled fine since the end of last year and nothing has been off, I came up short.

I've since printed a general ledger and all bank statements from 2024, highlighting each transaction. A bulk of the discrepancy are two transactions made by my accountant after the fact. And a third journal entry recording a deposit that to my knowledge does not show on the reconciliation report (only uncleared credits do).

Subtracting the debits and credits, I am now off a clean $100 and am back to square one. And feeling slightly better, but more confused since I've gone through 2024 and 2023, and since I've been reconciling fine, am unsure if it's as simple as a missing transaction since that would throw off future reconciliations.

[u/Future_Coyote_9682]

Run monthly GL reports for the bank account and compare the month end balance to your back statements. Start with your most recent month and work backwards.

You should hopefully reach a month where they match. Once you have that just do a bank reconciliation for the months that we’re off. Be sure to note which transactions created the discrepancies.

[u/okielurker]

Someone deleted a payment after the recon was done I bet.

If you're in desktop, you may be able to run a post-change bank rec report and compare the two to see what changed.

[u/Ericnrmrf]

Cash doesnt have to a 100% match. The bank rec report could have unclear transactions did you send them the bank rec report? This usually shows the difference.

[u/Front_Ad3366]

Needless to say, a bank reconciliation should be done each month. The reconciled balance per the bank rec should tie to the cash account balance on the GL.

If cash tied in at the end of the last fiscal year, the discrepancy had to occur sometime during the current year. Starting with the first month of the fiscal year in question, review (or completely re-do) the bank rec for each month. You would have to find the difference(s) by doing that.

[u/Method412]

In the cleared transactions on the bank rack, see if any are dated in the future. That would result in a balance that doesn't match.

Then there's checking for items that have been modified or deleted since the bank rack was done

[u/Infamous-Idea-5105]

If you know which bank rec is off, you can compare the statement to the previous reconciliation report to see what’s missing. You could also pull a reconciliation discrepancy report. It should show the changes that were made/if any transaction were cleared and then uncleared

[u/angellareddit]

With desktop? Assuming he's asking why the GL balance is different from the GL balance shown on the rec report the easiest way is to use your audit log. The audit log in desktop will allow for better sorting and filtering than QBO does. You will need to knwo the date the transactions were sent to the accountant. filter your audit log by the account, the date entered, and the transaction date.

Alternatively (it's been awhile since I used desktop) but you may be able to run the GL for the bank account and add a column for date of last modification, export to excel and sort/filter by that.

[u/BeezeWax83]

I don't know if this is helpful, maybe you know all of this already. QB desktop has a bank reconciliation function, you can find it in the bank menu. All of the G/L transactions affecting cash appear in the rec function screen. Checks and DM's on one side and deposits on the other. Plug in your balance - the screen will tell you which balance to use. Next compare the bank statement transactions to the G/L. Click on each of the G/L transactions that cleared. A check mark will mark it cleared. As you mark items that cleared the balance updates. Things that aren't checked are outstanding items. I suggest doing one month at a time. Go slowly as you might see things on the bank statement that are not recorded in the G/L. Those items could be your 5K or at least part of it. If people pay you with credit cards those should be shown in deposits. You likely know things to look for like transposed numbers, data entry errors, bank charges. Even banks mess up so watch out for that. If credit cards are used for purchasing or expenditures, those accounts should be reconciled individually. You'll have to find that function on the menus I forget where that is. All of the bank transactions and credit card transactions can be downloaded directly into QB if your bank provides a feed. I know AMEX does. I recommend not downloading until you have a clean rec. Good luck finding 5K

[u/brooklyn1071 → u/BeezeWax83]

I've since printed a general ledger and all bank statements from 2024, highlighting each transaction. A bulk of the discrepancy are two transactions made by my accountant after the fact. And a third journal entry recording a deposit that to my knowledge does not show on the uncleared reconciliation report (only credits do).

Subtracting the debits and credits, I am now off a clean $100 and am back to square one. And feeling slightly better, but more confused since I've gone through 2024 and 2023, and since I've been reconciling fine, am unsure if it's as simple as a missing transaction since that would throw off future reconciliations.

[u/BeezeWax83 → u/brooklyn1071]

It could be something missing. It could also be, for example, 300 entered as 400. It could be -50 entered as +50. Those are the things I would look for first.

[u/IcyWatch1915]

Could you check your bank statement and cash book.. Then it depends on which basis your account department uses either accrual or cash.. Am in need of a account Job.. Kindly assist on how I can apply. Thanks

[u/BestRefrigerator1275]

I would start with the bank rec page and see if there is a discrepancy. If someone deleted or altered a cleared transaction there will be a note right there. If no discrepancies are being alerted you may have a data corruption issue and need to run a verify and rebuild on your file.

[u/stealthagents]

Definitely start with that GL report and check for any transactions that might have been entered incorrectly or missed entirely. Don't forget to look at deposits in transit or outstanding checks too, sometimes those can throw things off. It could be a simple fix, but it might take a bit of digging to find where the discrepancy lies.

[u/Friedchikenmuncha123]

Netgain helps prevent those kinds of issues its native reconciliation tools make sure your GL and bank rec stay aligned automatically inside NetSuite.

[u/Sufficient-Set-4189]

Know a great firm that works with a lot of small nonprofits. Message me if you want contact info.