Credit score Card Q&A In QuickBooks

29 Aug

Occasionally new customers of QuickBooks have queries about how credit card function in the software. Here are some useful bites of info about this topic.

Aren’t Credit Cards Cost Accounts?

No. In the Chart of Accounts, liability accounts represent amounts of income owed to other individuals. Credit cards are liability accounts, because every time we use our credit score cards, we owe money to the credit card firm. 1 wonderful feature of QuickBooks is that it enables us to set up a specific variety of account for credit cards, known as, not remarkably, “Credit Card.”

But make no blunder: this variety of account is a liability, and not an expense. When you acquire some thing with a credit card, you are spending for it with borrowed money, and the money is borrowed from the credit score card company. This is why credit cards are regarded as liability accounts.

So When Are Expenditures Recorded?

When using the credit score card, the cost is recorded in the Record Credit score Card Costs screen, in the reduce half of the screen, in the Expenses tab. Let us say you went to Workplace Depot and bought some laptop paper with your credit score card. Two items happened when you did this:

1. You incurred an cost for Office Supplies

2. You went into financial debt to the credit card company

When utilizing the Enter Credit Card Costs screen, both of these activities are recorded on a single display.

How Does This Relate to Double Entry Accounting?

This over transaction is an exceptional illustration of double entry accounting. Keep in mind this and it will support you a great deal in QuickBooks: each transaction in QuickBooks is double entry – it records two occasions with a single transaction. If you grasp this, and comprehend what those two events are in each display, it will save you a whole lot of time and difficulty in the extended run.

Credit score Card Consumers, Credit Card Accounts. . . How to Set Up in QuickBooks?

Even if you have several credit card end users for a principal account, my suggestion is to have a single account set up in QuickBooks for all consumers. An choice is to set up sub-accounts beneath a parent account, one particular sub-account for each and every credit score card consumer. But I believe the single account will be easier to handle.

The only explanation to set up sub accounts is for some internal, management explanation – do you truly need to have to track the separate liability balances and bills by credit card consumer? How helpful will that details be? The additional function to maintain track of it this way requirements to be offset by the usefulness of the info.

Maintain in mind, also, that a few separate payments will need to be paid for each and every of the separate sub-accounts – this will guarantee that the liability balances in QB will stay right. My suggestion is to keep life basic and only use a single credit card liability account in this scenario.

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