# Is the "Sum of the Squares" equation used to reconcile bank accounts?

One thing I always found to be a pain when using Quicken is to be able to figure out what checks/transactions have / haven't been reconciled yet.

It always makes my balance look like it's off.

Do people use the Sum of the Squares equation to determine what combination of transactions could possibly be throwing a balance off?

• For me, quicken seems to do a great job of "auto-reconciling", clearing only transactions that result in the correct balance. How it does it I have no idea, so I'm not sure what you're asking. I've never heard of "sum of squares" for anything other than variance analysis. Jun 23, 2022 at 17:54
• @DStanley Yeah that's why I think maybe I'm in the wrong stack-exchange to ask the question... Jun 23, 2022 at 18:03
• Calculating the sum of the squares (variance) is going to tell you whether all your expenditures are similar ( small variance) or whether you have a mix of large and small expenditures (high variance). If most of your transactions are \$25 it could help you spot the one that's \$2500, but It's not going to tell you which entry has a typo where you entered \$15.99 rather than \$18.99. Jun 23, 2022 at 18:16
• Is your account in Quicken connected to your bank, do you download a QFX file, or do you input transactions manually? Jun 25, 2022 at 2:24

If you are writing a lot of cheques, best practice is to separately 'balance your cheque book' and go through cheque by cheque against your bank account to see what hasn't cleared yet.

I can't really think of a scenario where your proposed method would be more helpful than actually performing this as a separate action.

• I can, it's called using a computer to do things faster and more accurately. Maybe this isn't the correct stackexchange. Jun 23, 2022 at 17:33
• @leeand00 You can't just "average" your way into being confident that your power bill didn't get lost in the mail. You have to individually check that each payment was successfully made. It's a bit amusing that you appear to be under the impression that you've just reinvented accounting with a mathematical equation, despite apparently being quite unfamiliar with current practice. Jun 23, 2022 at 18:25
• I generally don't write checks or use the mail to pay bills. It's slow. Jun 23, 2022 at 19:05
• @leeand00 Right, this is a non-issue for personal accounts due to volume, and for corporate accounts automated cheque register listings are offered by banks to indicate which cheques have been written but not cashed. There is no problem to solve here, just an odd solution you have proposed. Jun 23, 2022 at 19:22
• I'm confused by your response, this answer states that sum of squares would not provide an advantage and you say: "it's called using a computer to do things faster and more accurately." If you're convinced that sum of squares is helpful for this task, why ask? A combinational sum of the transactions could be useful in providing a list of candidate transactions that explain a disparity, but perhaps I'm not understanding the issue as I'm not a Quicken user. Jun 23, 2022 at 19:55

Hmm, when you say "sum of squares", I think of the algorithm for calculating deviation from an expected value. That really has nothing to do with reconciling a bank account. Maybe there's some other algorithm that has the same name that's relevant.

But I doubt it. The real way to reconcile a bank account is to go through all your transactions and see if they have cleared. I haven't used Quicken in many years, I use an accounting program that I wrote myself, so I can't speak specifically to Quicken.

But in general, any good accounting system should allow you to enter transactions when you make them. Like you write a check, or these days more likely initiate a transaction on a web site, so you enter the date, the amount, who you wrote it to, maybe some other data. Then some time later you get a statement from the bank listing all the transactions that they have processed. You go through all these transactions one by one, matching them against the transactions you initiated. If you're doing this on paper, there's typically a column on the register to put a check mark when there's a match. If you're using software, there should be somewhere to check it off.

If you're using software, there should then be some way to get your "reconciled balance", that is, what is the balance after we apply all the transactions that the bank acknowledges. This total should match the balance on the statement you got from the bank. If not, you or the bank or your accounting software made a mistake somewhere. Odds are it was you, so the next step is to go back over everything and look for an error. If you're really sure you didn't make a mistake, you can study the bank statement and see if you can spot an error.