OK, so I already missed a day in my 30 day series but I’m making up for it now! Today’s tip has to do with business credit cards. For more details on this topic, check out episode 11 of my podcast “Tracking Credit Cards In QuickBooks“.
Tip #6 of 30: Enter individual credit card charges, not monthly totals
A lot of small businesses use a business credit card to pay for expenses such as gas, office supplies, travel and meals. And a lot of bookkeepers don’t enter each charge individually, they just wait until the credit card statement comes in the mail and they enter the total amount onto a bill or check. Sometimes they break it down into multiple expense accounts but for many businesses there is an expense account called “Credit card expense” and the whole amount goes there.
This is not a good bookkeeping practice for several reasons. Most importantly, there needs to be a proper accounting of all expenses. So if there are 10 transactions on a credit card statement for gasoline purchases, 3 transactions for restaurants and 3 transactions for office supplies, then at least 3 separate expense accounts should be posted to (Auto Expense, Meals, and Office Supplies). Also, there is a problem with the timing of the transactions. If everything gets entered on the same date (the date of the credit card statement) it could distort reality for 2 different accounting periods. Say your credit card statement starts on the 15th of the month and ends on the 14th of the next month. If all the charges get posted as totals on the date of the 14th, then expenses aren’t getting charged to the proper periods.
Another issue is that of reporting and tracking. If individual credit card charges aren’t getting recorded with the actual vendor names then you are losing a whole layer of information that could be useful. You’ll never know which vendor you spend the most money with and it will be more difficult to track down the details of any one specific charge. And you’ll have a much harder time discovering any bogus charges if you never see any actual paper receipts.
So my tip is this: enter each credit card charge individually, using the real vendor name and the real date of the transaction and post it to the proper expense account. Devise a system to make sure you get the credit card receipts from the person(s) that are using the credit cards and just do it. It only takes about a minute to record a charge and it has many benefits, as mentioned above.
Did you find this tip useful? If so, I would love for you to leave a comment below. I would also love to hear some of your favorite QuickBooks tips!
This post was written by Michael Debyah.
Hi there! I'm Mike. I am a CPA and an Advanced Certified QuickBooks ProAdvisor. I teach QuickBooks locally in classrooms and do one-on-one training sessions. I created this site so I could extend my teaching to more people and offer them the best support possible.
Hi there Mike,
I love this tip.
What advice can you give on using personal credit cards and recording transactions for that, as well as handling the payment of those individual credit cards, or reimbursements?
Thank you for the great tip! Do you enter the credit card transactions in the credit card field
or do you enter them in general journal? If charges are entered in credit card section, are they automatically credited to accounts payable?
Thank you!
I would enter the credit card charges using the “Enter Credit Card Charges” function. You can see my lesson on it here: Tracking Credit Card In QuickBooks. You need to have a credit card type of account created first, which is a liability account similar to Accounts Payable.
Hello,
And if you don’t pay the total balance? I am confuse that the balance when you enter is positive right? We changed accountant and the balances came negative? Is this right?
If you are looking at a Balance Sheet report or the Chart of Accounts list, then the credit card accounts should have a positive balance. It could go negative if you made an overpayment for some reason, but generally it should have a positive balance (which is actually a credit balance if you are looking at debits and credits). Any payments you make will be debits, which will lower the balance in the credit card account.
Is there a significance to entering the sale/transaction date VS the posting date?
I have always done the actual sale date, but ran into an accountant who goes by posting date.
If i enter an invoice for company x and that invoice was paid using the credit card and i go into enter credit card charges and enter it. it shows under that vendor x that i made a payment of that amount but doesnt attach it to that invoice to mark that invoice paid. So should I not enter the invoice? Please help. Thank you
If you are paying a bill from a vendor with a credit card, don’t enter it under “enter credit card charges”. Instead, go to “pay bills”, select the bill for payment and then choose the payment method as the credit card instead of the checking account. That will enter the credit card charge and tie it to the bill that was paid. I hope that helps answer your question. If not, please let me know.
Yes it does thank you. So really there isn’t a point in entering credit card charges through the credit card link directly? It will automatically put the charge on the credit card if we select the invoice to be paid by it? So technically the enter credit card charges tab really shouldn’t be there except for interest charges and other fees right?
For instance if we pay at the counter with our credit card and I get a receipt for that but not an invoice and do I enter into the credit card charges or do I create a bill then pay bills and select the credit card. I just want it to all come out right. Thank you for your help.
I understand the concept of entering each credit card charge seperately and positng to the respective expense accounts. How then do the expense accounts get cleared out? Does this happen when you make a payment or reconcile. Not used to posting charges this way and I want to make sure I understand the entire process. Thanks!
If you buy something with the credit card and get a receipt you then need to enter that charge under “enter credit card charges”. You wouldn’t enter it under “enter bills”. I think maybe you are confusing the two procedures.
So use the “enter credit card charges” function when you use the card to pay for things that you have not entered a bill for. If you are using the credit card to pay for something that you have already entered a bill for, use the “pay bills” function and choose the credit card as your payment method.
I’m not sure I understand your question. Why would you want to clear out the expense accounts?
Mike,
Can you help me understand why entering a credit card bill in QBs shouldn’t be treated the same as any other bill. I’ve been entering my credit card as a bill for years and just recently added another credit card and decided to enter this one the “right” way. I haven’t noticed any benefit to it. BTW, I have my credit cards set on a calendar month, but even had I not requested this, I would just entered two payables to make sure the expenses appear in the proper accounting period.
Thanks,
Will
Sorry it took me so long to get to this – I didn’t see the comment in my notifications for some reason.
If you enter the whole credit card statement as one single bill then you are probably missing out on the details of each transaction (vendor, date and amount). I assume you are lumping similar items together? Also, if you enter each individual charge throughout the month it allows you to maintain a current credit card balance in QB.
If you don’t need that level of detail then it probably is easier to do it your way, but I prefer to have the ability to see each charge individually. That way QB has all the information available for searching later on.