Fixing credit card balances on QBO
Fixing credit card balances to show properly on a balance sheet is one of those chores I do monthly to tidy up the books. It is something I see time and time again when the credit card account has several employees included in the one statement. Many times the accounts are set up accurately, but the bookkeeper does not enter the payment to the sub credit card accounts. This will cause a negative balance in the parent account (as a general rule). Just like this cat, it is a balancing act.
Fixing credit card balances...do it right the first time
If this is your very first time working with credit cards and QuickBooks, it can be confusing. Set up is key. The most common setup for a bank account or credit card account with multiple cards associated to it, is to have a parent account used for reconciling and then to have each individual card set up underneath it as a sub-accounts. Only accounts connected to bank feed would be the individual cards (sub-accounts).
Your chart of accounts should look like this:
Parent (Reconcile) Account
Employee 1 Card 1234
Employee 2 Card 5678
Employee 3 Card 9101
Create the sub accounts...
- Click the Gear icon at the top, then select Chart of Accounts.
- Choose New at the top.
- In the Account Type drop-down, select the account type (Credit Card).
- In the Detail Type drop-down, choose the type of account you want to create (Credit Card).
- Enter a name for the account In the Name field.
- Check the box for Is sub-account, and chose the parent (reconcile) account
- Click Save and Close(or Save and New if you want to enter another account right away).
You may see "opening balance" box in the setup. DO NOT ENTER A BALANCE THERE!
Connect the credit card accounts to the bank feed....
Make sure you connect the individual accounts to the individual cards. The parent account should not show on your bank feed. All transactions, including the payment, should post through these individual cards. Most people do not do that last step. They end up reconciling the payment through the parent account. If you find that you have been reconciling to the parent account, fixing credit card balances is simple. A journal entry to clean things up as demonstrated in the video.
- Credit card accounts are liabilities. So the if you owe on your credit card, the balance will be on the credit side.
- To shuffle the balances to look better on the balance sheet, you would debit the sub accounts and credit the parent. This will roll it all up into the parent account to match your credit card statement.
The transaction would look like this:
Debit : Credit:
Employee 1 Card 1234 xxx.xx Parent account xxxx.xx
Employee 2 Card 5678 xxx.xx
Employee 3 Card 9101 xxx.xx
Bonus tip: Not demonstrated on the video, I prefer to add my credit card statement to my payment (especially if it the credit card is paid in full). I just attach it so it is in the system, easily obtained by one click of the attachment.
Fixing credit card balances: Correcting the balance after reconciling
In my example in the video, the bookkeeper did not post the payments properly. It caused large balances both positive and negative to show in the individual accounts as well as an "odd" balance in the parent account. Making a journal entry will roll the actual balance up into the parent account. If you need to send the balance sheet to the CPA, you can simply click collapse to roll up the balances to the parent accounts or leave the balance sheet as is with just the total amount due on the credit card in the parent account.
Make this part of your monthly review of your records. The journal entry can just tidy up the figures to roll into the actual open balance on the credit card statement. Here is another post you may find helpful on credit card duplicate payments.
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