Account Reconciliation Newbie Question
bronwynrh
Member Posts: 3
At least, I think this must be a newbie question...
When I go into Reconciliation and open my business checking account, I'm seeing withdrawals listed as Credits and deposits listed as Debits. That makes zero sense to me. Am I missing something obvious, or is something wrong?
I started with Wave mid-year (came over from 17Hats) and am trying to reconcile back to the beginning of the year. I may need to find a help topic on that, too.
Anyway, can someone walk me through the Reconciliation page and explain why the columns are named as they are?
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For example (if it helps):
On September 4, 2018, I made a payment from my business checking account to my AmEx credit card.
On my bank statement for the business checking account, this appears as a debit.
On the Reconciliation page for the same business checking account, the transaction appears under the credit column.
After writing it out like this, I'm starting to wonder did I do my categorization backward?
Hi, @bronwynrh,
It seems like you did do this backwards, @bronwynrh. The short version of why is that when you look at your bank statement, it's written from the perspective of your bank, not of your business. Your books are from your own business' perspective, which is the exact opposite. You can find a more in-depth explanation of this in Fearless Accounting[link], our guide to best practices with Wave, on page 79. If you're looking for a good starting point to both using Wave, and to accounting, I can't recommend that guide enough
Debits and credits affect different types of accounts differently. Here's a quick table that might help...
So for a credit card payment, you'll be crediting an asset account (your bank account), which lowers the balance, and debiting a liability account (your credit card), which lowers how much you owe.
Let me know if that helps out!