Into what category do I place a balance adjustment?

Storner

When Quicken alerts me that I have a “balance adjustment” in my checking account, I immediately attempt to resolve the issue. But for the occasions when there still remains a “balance” that I can’t resolve, into what category do I place the adjustment? Do I create a “balance adjustment” category” letting that be the placeholder for my mistakes until such time as I can, if ever, resolve the balance?

volvogirl

Yes or you can enter the same Account for the category.  Then it won't go anywhere.  It will be a one sided entry.  But you really need to figure out what's wrong.  How much are you off?  pennies or thousands?  

Chris_QPW

The category should be the account name surrounded by square brackets like this:
[Checking Account Name].

This "fake transfer" is the syntax that Quicken Windows uses to mean change the balance of this account without affecting any other account or category (as in money came in or out of Quicken from an account you aren't tracking in Quicken).

Chris_QPW

P.S. Normally you should always find and resolve problems, but there are cases where a balance adjustment is the right thing to do.

In my wife's 401K that Merrill Lynch services it is very typical for them to buy or sell slight different cash amounts than what is transferred from her pay check.  Just a few cents here and there, and I'm sure over time they probably balance this out, but it is always there.

In my Lending Club accounts the security are "notes".  Well a note is a loan to a person that has been split between lots of investors.  So in fact each investor might be owed a fraction of cents from a payment.  So they keep track of these and adjust the amount given to certain investor to keep it all fair.

So in both cases I use balance adjustments for these kind of the "rounding errors" that are out of my control.  But I know the source of them and don't just blindly accept balance adjustments.  Do do that you aren't really reconciling.

Storner

Thanks, volvogirl.

What do you mean by a “one sided entry?”

You ask… “How much are you off? pennies or thousands?” I am off by less than $3k in each of 2 cards and each over a single year, though the transactions in the register for each card match my paper receipts and the monthly statement. This leads me to wonder if the issue and the resolution is more related to “reconciliation” and “starting balance”

Storner

Chris_QPW, thanks…

You refer to a “fake transfer.” How, for example, would creating the “fake” cause trouble in an account I am tracking in Quicken? I’m trying to stay alert to avoiding a cascading consequence which could make my “fake” solution problematic somewhere else without me knowing it

volvogirl

A one sided entry (or fake transfer) is an entry without going to a category or to another account.  It points back to itself by putting the name of the account you are in as the transfer account like [Credit Card].  Then it does not go anywhere.  

In accounting and Quicken you usually make a 2 sided entry as a debit and credit.  Like transfer from Checking to Savings or write a check for an expense

Sounds like you are off by a lot?  I think under 3k but over $100 would be a lot.  But to me I would move heaven and earth to find even one penny difference.  Can you go back in time and find where you did balance?    

Chris_QPW

I see that I didn't state this correctly.
"The category should be the account name surrounded by square brackets like this:
[Checking Account Name]."

Here is a better description.  The category field should be set to the name of the account you are in surrounded by square brackets.  Like if you are in "Checking Account Name" you would put in [Checking Account Name].

The "fake transfer" comes from the fact that if I wanted to transfer money from "Checking Account Name" to "Credit Card", I would put in [Credit Card], so this is the "transfer syntax", but in the case of a balance adjustment the "from account" and the "to account" are the same which makes little sense, that is why it is just a "fake transfer" syntax to mean like VolvoGirl called it a "one sided entry".

As for what kind of problems this can cause, let's back up and ask "Why reconcile?"

You reconcile because if what you think you have by looking at Quicken gives you a false sense of what is in your account you can do all kinds of wrong things like overspend what is really in your account, and so to avoid that you are checking to make sure you have really accounted for everything correctly.

One might think that because they put in a balance adjustment and now the balance in Quicken and the balance at the financial institution that they are now OK.
That may or may not be true.

Here is an example.  Say I wrote a check for $500, but it hasn't been cashed yet.  You have entered it into Quicken manually, but accidentally marked it cleared.  Your reconcile is now off by that much, but instead of fixing it you put in a balance adjustment.  Now thinking that everything is fine go along spending money and your account has say $200 in it.  Now later that check is cashed. Your account will be overdrawn and yes when you go to reconcile it will be off again.

OK now that probably isn't exactly what is your problem, but look at it a different way.  If your accounting isn't accurate how much can you rely on it?
Until you know why your account is no accurate you really can't judge how big the problem is.  What might be a $10 mistake today might be $1000 tomorrow.