Credit cards used for paying expenses are often not handled well using QuickBooks. Despite the presence of required features, users make “common errors in handling credit cards through QuickBooks“.
It is highly recommended to create a separate account to deal with credit card expenses. You can set the account type to Credit Card. On the other hand, debit card transactions are to be recorded in the bank account’s check register.
Common Errors Related to Credit Cards in QuickBooks
Here are the most common errors users face while managing credit cards in QuickBooks:
- Only partial payments are made on the credit card bill. Some amount is still due in such cases.
- Recording Accounts Payable, especially when it comes to revolving debt balances.
- Error while Reconciliation of Credit Card accounts.
- Only one expense account for all credit card bills.
- Customer’s declined credit card payments
- Credit card payments declined
- Unable to update credit card payment and detail
- Credit cards not Consultanted
- Not an allowed card type
- Invalid Credit Card Type
- Invalid merchant account
- Credit Card Reconciliation Problem
- Not connecting QuickBooks Online to your bank and credit card accounts
- QuickBooks POS Credit Card processing error
- QuickBooks Credit Card Payment not showing up
Let’s look at these errors in more detail and understand how we can avoid them.
Solutions to Common Credit Card Errors in QuickBooks
Although these errors are quite common, you don’t require any advanced accounting knowledge to resolve them.
First things first, you need to create a credit card account for each card. These accounts will record all the transactions related to the relevant credit cards. Instead of being tied to a bank account like a Debit Card Account, the Credit Card account is often independent. You must record all debit card transactions through the relevant bank accounts and not through the credit card accounts.
Users (clients) usually want to enter a summary transaction rather than multiple individual charges. Once you or the client has summarized the transactions for the credit card, you can easily enter the summary transaction into QuickBooks. You can go to the Banking menu and create a Credit Card Account in which you can enter the summary transaction created earlier. You can also enter multiple transactions and associate them with the appropriate account types. For convenience, enter the date of the transaction as the date on which the financial statements will be affected. Make sure that you enter transactions that occur in different financial periods separately.
If your client has paid the credit card bill in full, then he or she can enter the total amount paid as the summary transaction. This is only recommended in cases where the client has paid the bill in full each month. If this isn’t the case, then we recommend that you try the method mentioned in the previous paragraph.
Credit Card Account
In QuickBooks, you can find credit card-type accounts that can be used for the following reasons:
● To reconcile bank statements: The reconciliation process will involve the reconciling of credit card statements.
● As income tax deductible: Charges on the credit card are income tax-deductible. If instead of a credit card type account, you choose to record the transactions through bills, then you won’t be able to report on an accrual basis. This is why a credit card-type account is preferable.
● For Accounts, payable aging reports: If you record the transaction in a credit card type account, then credit card statements not paid in full don’t distort the accounts payable aging reports.
Number of Entries for Credit Card Transaction
You can enter the credit card charges when the credit card is used for payment or later. This is something that you need to decide before you start recording your credit card transactions.
- To provide your client with real-time information about their spending habits, it is better to enter the transaction when the credit card is used.
- You can do this manually or by downloading the list of transactions from your bank account that is connected to QuickBooks.
- Recording via bank account is preferable as the information is accurate.
- You may have clients who don’t want to go through the hassle of entering each particular charge into the accounts.
- For such clients, you can record summary transactions and further summarize them by account type.
The most important thing here is to select one particular method to record credit card transactions in the accounts. You will face challenges if the dues aren’t paid properly, and you’ve recorded the transaction as a summary for a month or financial period.
Reconciling Credit Cards
Credit card reconciliation is very similar to bank reconciliation. You need to match the transactions mentioned in your books with the ones from the credit card statement. The credit card statement can be downloaded from your bank account. At this stage, you can also enter the finance charges.
A bank reconciliation statement is created to ensure the accuracy of accounting data. Similarly, a credit card reconciliation statement ensures that accounting data related to the credit card are accurate, facilitating the process of credit card payment. To create a credit card reconciliation statement, you can download the statement and click on the Reconcile Now option. You’ll be provided with options to pay the credit card statement with a check. You need to enter the payment amount.
Sometimes, your client may pay more than the due amount. You should not create a bill or check for this additional payment during the reconciliation process. Instead, you should quit the reconciliation process and create a bill or check and associate it with the additional payment. This payment will appear in the reconciliation statement for the next month or financial period.
I hope the above mention information will help you to fix Common Accounting errors with Credit Card in QuickBooks. If you are not able to fix an Error with Credit Card in QuickBooks, then connect with our QuickBooks Error Consultant to fix the issue.
Can I Record the Credit Card Transaction in a bank account?
No. Bank accounts record debit card transactions. For recording credit card transactions, you must create a credit card type account. For each separate credit card, you need to create a separate credit card account in QuickBooks.
Isn’t the credit card reconciled when the bank account is?
No this is not the case. Although you are required to create a bank reconciliation statement, creating a credit card reconciliation statement is optional. However, we recommend that you do it to avoid errors.
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