Creating Credit Card Accounts
You should set up a QuickBooks credit card account in the Chart of Accounts for each credit card you use in your business. Like any QuickBooks account, a credit card account has its own register. The register lists all the charges and credits you’ve recorded, as well a payments you’ve made.
To create a credit card account, open the “Chart of Accounts” window by selecting “Lists| Chart of Accounts” from the Menu Bar. Then click the “Account” button in the lower left corner of the “Chart of Accounts” window and select the “New” command from the pop-up menu.
In the “Add New Account: Choose Account Type” window, select the “Credit Card” option button and then click the “Continue” button to open the “Add New Account” window. Enter the name for the account into the “Account Name” field. You can assign an account number by entering one into the “Number” field if account numbering is enabled within your QuickBooks company file. You can then enter the account’s “Description” and “Credit Card Acct. No.” into the fields within the “Optional” section, if desired. Once you have added any information you want to record, click the “Save & Close” button to create the account.
Entering Charges on Credit Cards
QuickBooks allows you to choose when you enter your credit card charges. You can enter credit card charges incrementally as you make charges to the credit card, or you can enter all credit card charges in lump amounts by account once you receive the credit card bill. Your choice depends on whether you enjoy entering information incrementally or all at once. Also, one advantage to entering the charges incrementally as you charge items is that you can keep close track of how much you owe. Another advantage is that if the charge is made for a particular customer:job, you can keep track of how much you are spending on that job. Another advantage to recording charges as they are incurred is that you can then reconcile the charges you entered against the credit card bill when it arrives, allowing you to spot errors and non-authorized charges more easily.
To enter credit card charges incrementally as they are incurred, select “Banking| Enter Credit Card Charges” from the Menu Bar to display the “Enter Credit Card Charges” window. Within this window, select the credit card account that was used for the charge from the “Credit Card” drop-down menu at the top of the window. To the right of that drop-down, ensure that the “Purchase/Charge” option button is selected. Note that you can also record refunds and credits to a credit card account by selecting the “Refund/Credit” option button, if needed.
Next, use the “Purchased From” drop-down to select the name of the vendor with whom you made the purchase. Enter the date of the charge into the “Date” field. You can enter the credit card transaction number into the “Ref. No.” field. Then enter the amount of the charge into the “Amount” field. If desired, you can enter a note about the charge into the “Memo” field.
At the bottom of this window, just as in the “Write Checks” window, you will then attribute the amount charges to the desired expense account or accounts by selecting an account from the “Account” column on the “Expenses” tab. The total amount will then appear in the adjacent “Amount” column. If the charge is for a job, you can select the name of the job from the “Customer:Job” column, and set its billing status within the “Billable?” column. If you need to split the charge amount between multiple expense accounts, change the “Amount” value shown, and then repeat the process in the next row until you have accounted for the entire charge amount.
Also note that if you use this window for purchasing “Inventory Part” items, or buying “Services” from subcontractors, then you will not enter the charge amount within the “Amount” field at the top of the form. Instead, you will click the “Items” tab at the bottom of the window and then enter the items purchased with the credit card charge, including their quantities and amounts. The sum value of the items purchased will then constitute the total amount of the charge entered into the “Amount” field above.
Once you have entered the credit card charge information, you can click the “Save & Close” button to save the transaction and close the window. After you have input the charge, QuickBooks adds the charge amount to the credit card account’s register, increasing the total account liability by the charge amount. It will add the same amount to the appropriate expense account once the bill for the credit card is entered or paid.
Reconciling and Paying Credit Cards
If you enter credit card charges incrementally, you can reconcile the entries that have been made against the bill when it arrives. This can be helpful in preventing unauthorized charges on the card. Reconciling a credit card account is almost identical to reconciling a bank account.
To reconcile a credit card account, open the chart of accounts and click the credit card account that you want to reconcile to select it. From there, you will click the “Activities” button in the lower left corner of the chart of accounts and select “Reconcile Credit Card” from the pop-up menu that appears.
That will display the “Begin Reconciliation” dialog box. Here you will input the statement date from your credit card statement, the ending balance from your statement, any finance charges you accrued, the date, and the account that you use to track those charges. Then click “Continue” at the bottom of the “Begin Reconciliation” dialog box to display the “Reconcile Credit Card” window for the selected account.
In this window, you will see all of the transactions that haven’t cleared. You’ll use this window to check off the transactions listed on your credit card statement. Click on each transaction to place a check mark in front of each transaction that matches your credit card statement to mark it as cleared. When you are done the “Difference” (in the lower right corner), should be zero. Click “Reconcile Now” to reconcile the account, and to select the options for the report that you’d like to have generated.
Once you’ve reconciled your credit card account, QuickBooks gives you a chance to pay all or part of the balance due by taking you immediately to either the “Write Checks” or “Enter Bills” window depending on which option you select in the dialog box that appears. The bill or check will already be set to the credit card account. The amount due for your credit card will also be entered already. You just have to select the name of the company to whom you pay the balance and then print the check or save the bill.