Credit Card refund and monthly payment

[bmrouse]

At a wall...

Anyone have any input on how I would post this transaction:

I need to make a monthly credit card payment ($100.00). We pay this credit card balance off each month. This store credit card is set as a vendor and not a liability account.

We use fund 01, 02, & 03 for different ministry departments.

The monthly expenses on this card for each account is 01, $8.00; 02, $92.00, 03, -$12.00.

(The 03 monthly expense reflects a refund issued/posting in this from a purchase in the previous month.)

The monthly credit card bill is $88.00.

I'm thinking if I issue a Fund Accounting debit for checking account in 03, $12.00, I'll have a lingering issue reconciling the month since the previous month has already closed.

Hope this makes sense. Any thoughts?

[NeilZ]

At a wall...

Anyone have any input on how I would post this transaction:

I need to make a monthly credit card payment ($100.00). We pay this credit card balance off each month. This store credit card is set as a vendor and not a liability account.

We use fund 01, 02, & 03 for different ministry departments.

The monthly expenses on this card for each account is 01, $8.00; 02, $92.00, 03, -$12.00.

(The 03 monthly expense reflects a refund issued/posting in this from a purchase in the previous month.)

The monthly credit card bill is $88.00.

I'm thinking if I issue a Fund Accounting debit for checking account in 03, $12.00, I'll have a lingering issue reconciling the month since the previous month has already closed.

Hope this makes sense. Any thoughts?

A few things;

1. You should really setup the credit card as a liability account, this saves you having to figure out which ministry area should be expensed, just have them bring you the receipts, and you enter as it happens. This also takes care of the issue with refunds, as you adjust the refund in the liability account before any checks are written. See the example transaction below.

2. You should NOT be closing months, at least not the month before. This is a holdover from business (accural) accounting and should not be done for fund (cash based) accounting. You can keep up to 18 months open in Powerchurch, and I fully advise you to do so. Disregard this if I misunderstood what you meant by closing the previous month.

3. Using separate funds for ministries is overly complicating things, unless each has its own checking, you really can do the same using Expense Account numbering: IE: 5100 thru 5199 - Personnel, 5200 thru 5299 - Worship, 5300-5399 - CE, etc.

That said, you need to reflect the fact that you received credit on the account for fund 03. Again, with the liability account setup, this would take care of itself, but you also did not receive any CASH credit. This makes it much harder to correct this.

Here are your figures: The monthly expenses on this card for each account is 01, $8.00; 02, $92.00, 03, -$12.00.

Using those you should do the following on the invoice:

01-1110-000 checking CR 8.00
01-5300-000 expense DB 8.00
02-1110-000 checking CR 92.00
02-5400-000 expense DB 92.00

This pays the existing bill - leave the credit on the account for now.

Now, create the liability accounts for the credit card. Once you do that, for the 03 fund enter a transaction through funds accounting.
I'm going to assume that the liability account number will be 2500-000 so the transaction will look like this:

03-2500-000 CC Liablity DB 12.00
03-5500-000 Expense CR 12.00

This returns the funds to the expense account originally debited so it reduces the YTD expenses, and puts a -12.00 in the liability account.

Then when you get a receipt against the credit card you would enter (assuming the expense is $60) a MANUAL CHECK in Accounts Payable. Normally you would have the vendor setup already if you've used them before. So if they're always paid by credit card, you can setup the vendor and in the Accounts tab, have the credit card liability account setup as the 'CREDIT' account. You can leave the expense account on the vendor empty if they're used by many different ministries, or enter expense account for that single ministry.

You'd then open Accounts Payable -> Maintain Manual Check and enter a manual check for that vendor. For the 'check number" I usually use the same notation BANK-CC (where bank is your credit card issuer). I'd then enter the expense amount, and the system will fill in as required.

03-2500-000 CC Liabiity CR 60.00
03-5500-000 Expense DB 60.00

This is done whenever you get a Credit Card receipt from someone who used the card.

When you run a Cash Management Report you will see that the liability account reflects that it has $48.00 since the -12 was deducted from the $60.

When the next CC bill arrives, you then RECONCILE the bill against the liability account, much like you do for your checking account to verify that all the CC entries are properly tracked in Powerchurch. Basically this makes sure that everyone gave you a receipt.

Once that's done, I expect that you may have other expenses for 01 and 02, so the invoice would look like this. Assuming that 01 spent $25, 02 spent $15, in addition to the 03 spending of 60 above. The bill comes in with spending of $100, but the payment in full is $88.00, the invoice would look like this:

01-1110-000 Checking CR 25.00
01-2500-000 CC Liablity DB 25.00
02-1110-000 Checking CR 15.00
02-2500-000 CC Liablity DB 15.00
03-1110-000 Checking CR 48.00
03-2500-000 CC Liablity DB 48.00

Thus you've covered the bill, and taken care of the refund.

In future, if you get such a refund against a minstry you would make the adjustment like this on the invoice in Accounts Payable (or you can do the first part as a fund accounting transaction), assuming the spending was $60.00, and the refund was $25.00 ;

03-2500-000 CC Liability CR 25.00
03-5500-000 Expense DB 25.00
(adjusts the liability account to reflect the refund, and the expense account to reflect the lowered spending)
03-1100-000 Checking CR 35.00
03-2500-000 CC Liability DB 35.00
(pays the ministry's CC balance after the refund)

Does this help at all ??

[bmrouse]

Exactly what I needed!