Entering Credit Card Transactions the Right Way

In QuickBooks® financial software, many accountants and bookkeepers still enter credit card transactions by categorizing them on the credit card statement and then listing the totals for each category as an account line item on a check that they pay to the credit card company. There are several problems with this system, including how dates, vendors, and payments are tracked, thus affecting accuracy, research on purchases, reconciliations, and more.

I recommend that each transaction be entered as an individual credit card charge in QuickBooks from the Banking menu. The benefits of using the Enter Credit Card Charges window include

1. The charge date is entered as of the date the transaction took place, not when payment is made, which could be over 30 days later. This creates more accurate reports.
2. The actual vendor is the name entered in QuickBooks, not the credit card company name. This makes it easier to track older transactions, for example to check on whether an item is under warranty.
3. Credit card statements can be reconciled in QuickBooks so each transaction can be verified. This leads to more accuracy and prevents extraneous charges from slipping through.
4. If a partial payment is made to the credit card company using the QuickBooks recommended method, the balance owing is tracked in a liability account, so the user always knows how much they owe. When a partial payment to the credit card company is entered on a check with the accounts as line items, it is very difficult to calculate how much of the payment to allocate to each account, and then track those allocations when the next credit card statement arrives.

Entering credit card charges individually is time consuming and detailed, but that can be mitigated by using generic names like Restaurant, Parking, Gas, Hotel, and General Vendor, when it is not necessary to have a specific vendor's name on the transaction. The process is made easier when the QuickBooks Auto Recall feature is turned on under My General Preferences, because then only the first few letter of the name needs to be entered and QuickBooks will fill out the rest of the transaction. The only thing that needs to be changed is the amount and date. The result is that it is easier to fix things when something goes wrong and the trail goes cold, because all the accurate detail is there, compared to the old way of recording credit card charges on the check payment to the credit card company.