Credit Card - Credit Balance

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OttawaPresbyBeth
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Joined: Fri Jul 20, 2018 4:17 pm

Credit Card - Credit Balance

Post by OttawaPresbyBeth »

Note: We use a credit card that is paid off every month. We followed the pattern indicated in the Spring 2015 newsletter (first option) as that description fit our intentions. Therefore, we had set-up the credit card as a vendor rather than a liability. That was just fine until a pandemic arrived….

In February, before quarantines and cancellations, we used our credit card to pay for a Continuing Education Conference for our minister (01-5610-001 DB $500.00) and paid the card in full. In March, we again paid the card in full. However, in April the card account was credited $500 when the Continuing Education conference paid for in February was canceled. The April card statement now shows a balance in our favor of $412.93, as we had other minor expenses totaling $87.07 (DB 01-5305-001) in addition to the $500 refund.

Normally, a card payment to a vendor would begin with a credit to the checking account. However, as no funds were returned to the checking account it didn’t seem right to do so. I’ve read through the forum and although I’ve found a number of questions concerning credit cards and returns, I haven’t found a scenario that describes what to do when nothing is owed on the credit card at month’s end. And of course we are now facing a similar situation in May as there is still a significant balance in our favor.

I’ve considered throwing accounting to the wind and take the ostrich approach (I’m an organist, not a trained accountant, and “noted” for misbehavior. Couldn’t resist a pun). I could just stick my head in the sand until enough time passes that we actually owe a balance on the credit card. That would take some time….probably about the same amount of time it will take for shelter in place recommendations to be lifted. (Have I put all the accountants out there in shock yet???) To be serious, however, all of the attempts that I’ve made to date to handle this scenario have been unsatisfactory. It also seems that best practices call for this account information to be updated monthly.

Your help would be greatly appreciated so that we can avoid the ostrich scenario and move ahead. Many thanks

Beth Myers
Ottawa Presbyterian Church

NeilZ
Posts: 10209
Joined: Wed Oct 08, 2003 1:20 am
Location: Dexter NM
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Re: Credit Card - Credit Balance

Post by NeilZ »

OttawaPresbyBeth wrote:
Sat May 09, 2020 4:48 pm
Note: We use a credit card that is paid off every month. We followed the pattern indicated in the Spring 2015 newsletter (first option) as that description fit our intentions. Therefore, we had set-up the credit card as a vendor rather than a liability. That was just fine until a pandemic arrived….

In February, before quarantines and cancellations, we used our credit card to pay for a Continuing Education Conference for our minister (01-5610-001 DB $500.00) and paid the card in full. In March, we again paid the card in full. However, in April the card account was credited $500 when the Continuing Education conference paid for in February was canceled. The April card statement now shows a balance in our favor of $412.93, as we had other minor expenses totaling $87.07 (DB 01-5305-001) in addition to the $500 refund.

Normally, a card payment to a vendor would begin with a credit to the checking account. However, as no funds were returned to the checking account it didn’t seem right to do so. I’ve read through the forum and although I’ve found a number of questions concerning credit cards and returns, I haven’t found a scenario that describes what to do when nothing is owed on the credit card at month’s end. And of course we are now facing a similar situation in May as there is still a significant balance in our favor.

I’ve considered throwing accounting to the wind and take the ostrich approach (I’m an organist, not a trained accountant, and “noted” for misbehavior. Couldn’t resist a pun). I could just stick my head in the sand until enough time passes that we actually owe a balance on the credit card. That would take some time….probably about the same amount of time it will take for shelter in place recommendations to be lifted. (Have I put all the accountants out there in shock yet???) To be serious, however, all of the attempts that I’ve made to date to handle this scenario have been unsatisfactory. It also seems that best practices call for this account information to be updated monthly.

Your help would be greatly appreciated so that we can avoid the ostrich scenario and move ahead. Many thanks

Beth Myers
Ottawa Presbyterian Church
Yeah ... that first option works until you have an issue such as this; which is why I suggest creating a Credit Card liability account as that handles issues like refunds. You still need a vendor account in order to pay the bill, but you wouldn't be Debiting an Expense account, but a Liability account when you cut the check.

In this case, you can create your Credit Card liability account. What you should do is create a transaction and CR the continuing education account for $412.93 (which basically returns 'funds' to the expense account thus showing that budgeted funds were not spend) and DB the new liability account.

Then when you spend using the credit card, you would enter each bill or receipt as a Manual Check with a check number of OFC-CC (what I use), you could use PSTR-CC, etc. Then you would DB the ministry expense account for the item purchased (say bulletin covers - you would use a Worship expense account), and CR the CC liability account. Each month when you get the CC bill, you would do a reconciliation just as you would do for checking, but you would change the account number used from the default 1110-000 (or whatever you use) to the CC liability account (say 2500-000).

Eventually, you'll get to the point where you will again owe on the card. You will see a positive amount on the Cash Management Report for the CC liability, it will show negative up to that point. When you then do a reconciliation after the CC bill arrives, you would then write the check DB the liability account (instead of an expense account) and CR the checking.

The main issue people have a problem with is entering the bill when you use the card each time, then paying the CC bill from a liability rather than an expense account. Remember, you've already expensed the purchase when you use the card, and enter the bill. All you're doing now is paying the bill from the funds already set aside.

Does that help??
Neil Zampella

Using PC+ since 1999.

fbctnc
Posts: 62
Joined: Sun Dec 01, 2019 5:19 pm

Re: Credit Card - Credit Balance

Post by fbctnc »

Our church pays the credit card off each month and we are also faced with the same issue because of cancellations. In our case the payment for the conference was made in November, 2019 and 2 refunds will appear on our May credit card statement because of the cancellation. Is there any way to make these credit card refunds without setting up the liability COA. If so, what are the necessary transactions.

Thank you.

NeilZ
Posts: 10209
Joined: Wed Oct 08, 2003 1:20 am
Location: Dexter NM
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Re: Credit Card - Credit Balance

Post by NeilZ »

fbctnc wrote:
Tue May 12, 2020 1:15 pm
Our church pays the credit card off each month and we are also faced with the same issue because of cancellations. In our case the payment for the conference was made in November, 2019 and 2 refunds will appear on our May credit card statement because of the cancellation. Is there any way to make these credit card refunds without setting up the liability COA. If so, what are the necessary transactions.

Thank you.
Not really. There is no easy way to properly account for the 'credit'. Most every church pays their credit cards monthly. What the liability account allow is a very easy way to track all purchases to the proper expense accounts, at the time of purchase.

Then when you do have an issue such as a refund, the liability account method allows you to properly expense other purchases.

Normally, if you get a 'cash' refund, you could return funds to the checking account, and then CR the expense account. That is a fully balanced transaction. However, when you get a 'credit' on a credit card statement, you cannot properly expense an item, as there are no funds that will be moved from checking.

Without any funds coming back in, you really cannot properly account for the refund.
Neil Zampella

Using PC+ since 1999.

fbctnc
Posts: 62
Joined: Sun Dec 01, 2019 5:19 pm

Re: Credit Card - Credit Balance

Post by fbctnc »

I have never used Power Church to reconcile a credit card statement, but would like to beginning with this month's credit card. This month's credit card does not have any refunds, but I wanted to get a liability COA set up to handle the credit card statement for the end of this month with refunds due to cancellations.

So, if I understand correctly, I need to . . .

create a new Credit Card liability COA 01-2850-000

use AP to cut a check to pay credit card bill with a credit to 01-1110-000 (checking) and a debit to 01-2850-000 (CCard) for $2,770.45

use FA to enter the actual credit card statement transactions, for example,
01-2850-000 Credit Card has a credit entry of $2,770.45
Below this line I list as a debit all my expenses that equal $2,770.45 so that my debits and credits equal and the transaction can be saved

When these transactions are posted from AP and FA and I try to reconcile the credit card (01-2850-000) there are no transactions listed to clear in the "payments and other adjustments" section or the "purchases and other transaction" section so that I can get a "0" to balance.

What am I not doing? I am trying to follow your instructions in the forum post and also the Spring 2015 Newsletter referenced earlier. In the forum post you mentioned creating manual checks with a check number of Pstr-CC. I tried those directions for each credit card charge, but used MCard PstrH, MCard PstrE, and MCard Admin so that transactions would appear on the unposted AP together. (I do not understand why there is a need to issue manual checks.) These transactions did not appear so that I could clear them when I reconciled the credit card statement either.

Also, this month, all credit card charges are to be paid from the general fund. What do I do about credit card charges that will use expenses from designated funds, such as expenses for fund 04 and expenses for fund 02.

Any help is greatly appreciated.

NeilZ
Posts: 10209
Joined: Wed Oct 08, 2003 1:20 am
Location: Dexter NM
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Re: Credit Card - Credit Balance

Post by NeilZ »

fbctnc wrote:
Wed May 13, 2020 3:33 am
I have never used Power Church to reconcile a credit card statement, but would like to beginning with this month's credit card. This month's credit card does not have any refunds, but I wanted to get a liability COA set up to handle the credit card statement for the end of this month with refunds due to cancellations.

So, if I understand correctly, I need to . . .

create a new Credit Card liability COA 01-2850-000

use AP to cut a check to pay credit card bill with a credit to 01-1110-000 (checking) and a debit to 01-2850-000 (CCard) for $2,770.45
This is the LAST thing you do after you reconcile the CC liability account.
use FA to enter the actual credit card statement transactions, for example,
01-2850-000 Credit Card has a credit entry of $2,770.45
Here's where you went wrong. You use Accounts Payable to enter the credit card purchases. You need to CR the liability, and DB expenses. To initially setup the liability the proper way, you should DB the liability and CR the original expense account in Funds Accounting, but that's the only time you should be using it. You use the actual vendors you purchase from. If its stuff like gasoline for cars, you can create a generic. In any case, you should be tracking what vendors you use for tax purposes. If you're using one person for goods or services all the time, you may be required to issue a 1099, so you need to know this as well.
Below this line I list as a debit all my expenses that equal $2,770.45 so that my debits and credits equal and the transaction can be saved

When these transactions are posted from AP and FA and I try to reconcile the credit card (01-2850-000) there are no transactions listed to clear in the "payments and other adjustments" section or the "purchases and other transaction" section so that I can get a "0" to balance.
More than likely you entered the date of the statement, and the date of the transactions are after that date?? Uncheck the box at the top of the reconcile screen to show all transactions.
What am I not doing? I am trying to follow your instructions in the forum post and also the Spring 2015 Newsletter referenced earlier. In the forum post you mentioned creating manual checks with a check number of Pstr-CC. I tried those directions for each credit card charge, but used MCard PstrH, MCard PstrE, and MCard Admin so that transactions would appear on the unposted AP together. (I do not understand why there is a need to issue manual checks.) These transactions did not appear so that I could clear them when I reconciled the credit card statement either.
You are also using this to track your spending at vendors, there are good reasons why you don't use Funds Accounting to enter paying bills. Again, you should be entered these as they come in along with the receipts and not wait until the bill comes in. This way you have full accountability for spending. Without doing this you may have purchases that are NOT church related, yet the church is paying. Yes, I know .. but my pastor wouldn't ... ... pastors are human too. This protects you from paying unauthorized purchases, and protects them from any IMPLICATION that they are doing so.
Also, this month, all credit card charges are to be paid from the general fund. What do I do about credit card charges that will use expenses from designated funds, such as expenses for fund 04 and expenses for fund 02.
The liability account will work like the checking (which I hope you only have one checking account), it can work across all funds, and all transactions will appear in the reconciliation. Then when you're done with the reconciliation, you can run an Account Activity report for the period of the credit card statement. I have it setup as a saved report so all I need to do is adjust the months and the dates takes less than 15 seconds. This will break down the spending by fund and total it by fund. The final total should show the total across all funds and the amount in the credit column should equal the statement.

So if you have $200 spending in 01, and $400 in 02.

When you write the check you would have four lines on the AP transaction. The check would have a total of $600.00, but the breakdown would look like this:

01-1110-000 Checking CR $200.00
01-2850-000 CC-Liab DB $200.00
02-1110-000 Checking CR $400.00
02-2850-000 CC-Liab DB $400.00

This may seem like a lot of work, but actually it takes less time entering them as they come in and filing the receipts in a folder until the statement arrives. How I do it is reconcile the statement with the account, print the reconciliation report and copy the statement, and staple these with the receipts and file that for tax purposes. (Remember, to keep this from being a INCOME to the pastors, you must get receipts showing that these charges are being used in their work for the church as ministers). Then I run the saved report I referred to above and write the check in AP as normal.
Neil Zampella

Using PC+ since 1999.

fbctnc
Posts: 62
Joined: Sun Dec 01, 2019 5:19 pm

Re: Credit Card - Credit Balance

Post by fbctnc »

Ok started over. This is what I have done so far.

In AP
Created vendors for each card purchase
Added manual checks made out to each vendor for each receipt using the date of the receipt for the transaction and CR the liability account (01-2850-000) and DB the expense account

In your last post you stated, "To initially setup the liability the proper way, you should DB the liability and CR the original account in FA, but that's the only time you should be using it." Not sure I follow this statement. What does this mean? Are you talking about something that needs to be done just 1 time or is this something that has to be done each month

Thank you.

NeilZ
Posts: 10209
Joined: Wed Oct 08, 2003 1:20 am
Location: Dexter NM
Contact:

Re: Credit Card - Credit Balance

Post by NeilZ »

fbctnc wrote:
Wed May 13, 2020 11:54 am
Ok started over. This is what I have done so far.

In AP
Created vendors for each card purchase
Added manual checks made out to each vendor for each receipt using the date of the receipt for the transaction and CR the liability account (01-2850-000) and DB the expense account

In your last post you stated, "To initially setup the liability the proper way, you should DB the liability and CR the original account in FA, but that's the only time you should be using it." Not sure I follow this statement. What does this mean? Are you talking about something that needs to be done just 1 time or is this something that has to be done each month

Thank you.
This is all based on having a CREDIT on the credit card statement due to a refund of a purchase. You have to set the original 'credit' in the liability account. Normally you would CREDIT the original expense account on such a refund, thus 'returning' funds to the budgeted account, and DEBIT the liability using a Accounts Payable manual check. This does a few things: it adjusts the accounts, and adjusts the vendor history to reflect that money was refunded.

So if you have a refund of $500.00 original spent from the Worship expense account. You would DB the liability account and CR the Worship expense in a manual check.

However, since you weren't using the liability account when this refund came in, you would do this in Funds Accounting to setup the Credit Card liability account. This setup is one of the only times you should be entering transactions in Funds Accounting.
Neil Zampella

Using PC+ since 1999.

OttawaPresbyBeth
Posts: 2
Joined: Fri Jul 20, 2018 4:17 pm

Re: Credit Card - Credit Balance

Post by OttawaPresbyBeth »

NeilZ wrote:
Sat May 09, 2020 8:36 pm
OttawaPresbyBeth wrote:
Sat May 09, 2020 4:48 pm
Note: We use a credit card that is paid off every month. We followed the pattern indicated in the Spring 2015 newsletter (first option) as that description fit our intentions. Therefore, we had set-up the credit card as a vendor rather than a liability. That was just fine until a pandemic arrived….

In February, before quarantines and cancellations, we used our credit card to pay for a Continuing Education Conference for our minister (01-5610-001 DB $500.00) and paid the card in full. In March, we again paid the card in full. However, in April the card account was credited $500 when the Continuing Education conference paid for in February was canceled. The April card statement now shows a balance in our favor of $412.93, as we had other minor expenses totaling $87.07 (DB 01-5305-001) in addition to the $500 refund.

Normally, a card payment to a vendor would begin with a credit to the checking account. However, as no funds were returned to the checking account it didn’t seem right to do so. I’ve read through the forum and although I’ve found a number of questions concerning credit cards and returns, I haven’t found a scenario that describes what to do when nothing is owed on the credit card at month’s end. And of course we are now facing a similar situation in May as there is still a significant balance in our favor.

I’ve considered throwing accounting to the wind and take the ostrich approach (I’m an organist, not a trained accountant, and “noted” for misbehavior. Couldn’t resist a pun). I could just stick my head in the sand until enough time passes that we actually owe a balance on the credit card. That would take some time….probably about the same amount of time it will take for shelter in place recommendations to be lifted. (Have I put all the accountants out there in shock yet???) To be serious, however, all of the attempts that I’ve made to date to handle this scenario have been unsatisfactory. It also seems that best practices call for this account information to be updated monthly.

Your help would be greatly appreciated so that we can avoid the ostrich scenario and move ahead. Many thanks

Beth Myers
Ottawa Presbyterian Church
Yeah ... that first option works until you have an issue such as this; which is why I suggest creating a Credit Card liability account as that handles issues like refunds. You still need a vendor account in order to pay the bill, but you wouldn't be Debiting an Expense account, but a Liability account when you cut the check.

In this case, you can create your Credit Card liability account. What you should do is create a transaction and CR the continuing education account for $412.93 (which basically returns 'funds' to the expense account thus showing that budgeted funds were not spend) and DB the new liability account.

Then when you spend using the credit card, you would enter each bill or receipt as a Manual Check with a check number of OFC-CC (what I use), you could use PSTR-CC, etc. Then you would DB the ministry expense account for the item purchased (say bulletin covers - you would use a Worship expense account), and CR the CC liability account. Each month when you get the CC bill, you would do a reconciliation just as you would do for checking, but you would change the account number used from the default 1110-000 (or whatever you use) to the CC liability account (say 2500-000).

Eventually, you'll get to the point where you will again owe on the card. You will see a positive amount on the Cash Management Report for the CC liability, it will show negative up to that point. When you then do a reconciliation after the CC bill arrives, you would then write the check DB the liability account (instead of an expense account) and CR the checking.

The main issue people have a problem with is entering the bill when you use the card each time, then paying the CC bill from a liability rather than an expense account. Remember, you've already expensed the purchase when you use the card, and enter the bill. All you're doing now is paying the bill from the funds already set aside.

Does that help??
A long delayed reply and thanks...It took us from April until December 2020 before we "spent" the credit balance on our credit card. Your method worked like a charm. Thanks for much for the detailed instructions!

NeilZ
Posts: 10209
Joined: Wed Oct 08, 2003 1:20 am
Location: Dexter NM
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Re: Credit Card - Credit Balance

Post by NeilZ »

Glad to hear back as I was wondering how it went.
Neil Zampella

Using PC+ since 1999.

gccc
Posts: 36
Joined: Thu May 06, 2010 6:07 pm

Re: Credit Card - Credit Balance

Post by gccc »

Could you expound on the settings used to set up your Account Activity report to print after reconciling the liability account? I can't figure out how to get the different funds to total separately. I'm missing something...

NeilZ
Posts: 10209
Joined: Wed Oct 08, 2003 1:20 am
Location: Dexter NM
Contact:

Re: Credit Card - Credit Balance

Post by NeilZ »

gccc wrote:
Thu Mar 03, 2022 11:53 am
Could you expound on the settings used to set up your Account Activity report to print after reconciling the liability account? I can't figure out how to get the different funds to total separately. I'm missing something...
Hmm ... this has to be done by memory, as I'm no longer at the previous location, but in the account activity report you do NOT enter any accounting fund numbers, just the number of the credit card liability account. The system will pull all the transactions, and then report on each accounting fund separately.
Neil Zampella

Using PC+ since 1999.

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