Credit card Q&A In QuickBooks

From time to time new customers of QuickBooks have queries about how credit card perform in the computer software. Right here are some valuable bites of facts about this topic.

Are not Credit cards Expense Accounts?

No. In the Chart of Accounts, liability accounts represent amounts of dollars owed to other folks. Credit cards are liability accounts, mainly because every single time we use our credit cards, we owe dollars to the credit card corporation. One particular good function of QuickBooks is that it makes it possible for us to set up a specific form of account for credit cards, named, not surprisingly, "Credit card."

But make no error: this sort of account is a liability, and not an expense. When you invest in a thing with a credit card, you are paying for it with borrowed income, and the income is borrowed from the credit card corporation. This is why credit cards are thought of liability accounts.

So When Are Expenditures Recorded?

When applying the credit card, the expense is recorded in the Record Credit card Charges screen, in the decrease half of the screen, in the Costs tab. Let's say you went to Workplace Depot and purchased some laptop or computer paper with your credit card. 2 points occurred when you did this:

One particular. You incurred an expense for Workplace Supplies

two. You went into debt to the credit card corporation

When applying the Enter Credit card Charges screen, each of those events are recorded on One particular screen.

How Does This Relate to Double Entry Accounting?

This above transaction is an fantastic instance of double entry accounting. Try to remember this and it will assistance you a lot in QuickBooks: just about every transaction in QuickBooks is double entry - it records 2 events with 1 transaction. If you grasp this, and have an understanding of what these 2 events are in every single screen, it will save you a lot of time and difficulty in the lengthy run.

Credit card Customers, Credit card Accounts. . . How to Set Up in QuickBooks?

Even if you have numerous credit card customers for a main account, my suggestion is to have One particular account set up in QuickBooks for all customers. An option is to set up sub-accounts under a parent account, A single sub-account for just about every credit card user. But I believe the single account will be simpler to handle.

The only purpose to set up sub accounts is for some internal, management explanation - do you truly require to track the separate liability balances and Expenditures by credit card user? How valuable will that info be? The additional function to maintain track of it this way requirements to be offset by the usefulness of the facts.

Try to remember, as well, that 3 separate payments will have to have to be paid for each and every of the separate sub-accounts - this will make sure that the liability balances in QB will remain right. My suggestion is to hold life simple and only use One credit card liability account in this scenario.