How to Reconcile Your Account in Xero – Part 1

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This is the first part in a Xero training where I’ll show you how to reconcile your account by creating new transactions.

Quick Instructions:

  1. On the dashboard click a blue Reconcile link in a bank accounts tile
  2. In the box to the right of an item select the Create tab
    1. Enter Why
      • Click “+ New Contact” if the contact is not already in Xero
    2. Enter What
  3. Click the OK button between the transaction and the Create tab

Keep reading for full instructions with screenshots.

In other accounting software, like QuickBooks, reconciling means comparing your bank statements to your account. And making sure everything matches.

In Xero, reconciling means reviewing and organizing transactions that have been downloaded from your bank accounts.

When viewing the dashboard your bank accounts will have a blue link telling you how many items need to be reconciled.

The number of items that need to be reconciled on a bank account in Xero

Let’s click on one of those links to begin. You’ll be taken to that bank accounts reconcile screen.

Reconciling a bank account in Xero

On the left-hand side of the screen you’ll seen the items that need reconciling.

On the right-hand side across from each items is a box with actions you can take.

You can:

  • Match with an existing transaction
  • Create a new transaction
  • Log it as a transfer between accounts
  • Discuss (add a note to the item)

In this tutorial I’m going to show you how to create a new transaction.

I’ll start with the first item in my list. A Paypal transaction where I paid Score $30.

With the Create tab selected I’ll enter SCORE as the “who” for this item. SCORE does not yet exist so I’ll click “+ New Contact” to add it.
Creating a transaction in Xero that requires the creation of a new contact

There’s nothing else that needs to be done and no confirmation. The contact is automatically added when you click that.

Next is the “What” drop-down menu where you select the reason you paid this contact. I’ll be selecting Education Expense.

Selecting from the What drop down menu when creating a transaction in Xero

The Why field is for adding an optional description.

When you’re done click the OK button that appears between the item and the action box.

Clicking OK when reconciling an item in Xero

When you click OK the item will disappear from the list and the number next to the bold Reconcile at the screen will go down by one.

Number of items to reconcile in an account in Xero

The next item in my list is money received but I know this was a refund. When I create this transaction I’m going to select the expense account it was originally spent from.

Reconciling a refund in Xero

That’s the end of this part of the training. In part two I’ll show you how to reconcile your account using the Cash Coding tab.

If you’d like to watch me walk through this process check out the video below:

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How to Reconcile Your Account in Xero – Part 2, Cash Coding

This is the second part of a Xero training on reconciling your account. In this part, you'll learn how to use the Cash Coding method.