Credit Card Refund Reconciliation Problem

[AWELCtreas]

Since I was the treasurer prior to the current treasurer, the current treasurer of our church came to me to solve this problem. Approximately a year ago, the church acquired a credit card, and the treasurer has been recording transactions treating the card as a vendor which has worked until now. In April, a new clutch was ordered for one of our lawnmowers, and shortly after, the order was cancelled as the church decided to replace the mower. The June credit card statement showed a credit for the original purchase, and when things did not reconcile properly in the general fund checking account, he asked me about the problem. I thought the best approach to the credit card was to create a liability account recording the transactions paid for with the card and then pay the credit card bill using the GF checking account. Then the credit issued by the card company was applied to the liability account. When reconciling the credit card, there is, of course, a balance showing in our favor for the amount of the applied credit. Here's how the transactions were recorded with the exception that the individual transactions were recorded as they occurred instead of grouped together.

Debit Credit
GF-2405-000 Credit Card $801.01
GF-5067-007 Pastors Conference Expense $318.00
GF-5733-000 Church Telephone 25.68
GF-5751-000 Outside Equipment Repairs 457.33

Credit Card bill paid immediately:
GF Checking acct. 801.01
Credit Card 801.01

June Statement credit applied
Credit Card 457.33
Outside Equipment Repairs 457.33

Credit card only used once in June for a phone payment of 25.68 so the statement shows a credit in our favor of $431.65 which isn't going to reconcile favorably, and there is leftover unused credit to be applied to future purchases.

I am unsure how to get the card to reconcile.

[NeilZ]

Since I was the treasurer prior to the current treasurer, the current treasurer of our church came to me to solve this problem. Approximately a year ago, the church acquired a credit card, and the treasurer has been recording transactions treating the card as a vendor which has worked until now. In April, a new clutch was ordered for one of our lawnmowers, and shortly after, the order was cancelled as the church decided to replace the mower. The June credit card statement showed a credit for the original purchase, and when things did not reconcile properly in the general fund checking account, he asked me about the problem. I thought the best approach to the credit card was to create a liability account recording the transactions paid for with the card and then pay the credit card bill using the GF checking account. Then the credit issued by the card company was applied to the liability account. When reconciling the credit card, there is, of course, a balance showing in our favor for the amount of the applied credit. Here's how the transactions were recorded with the exception that the individual transactions were recorded as they occurred instead of grouped together.

Debit Credit
GF-2405-000 Credit Card $801.01
GF-5067-007 Pastors Conference Expense $318.00
GF-5733-000 Church Telephone 25.68
GF-5751-000 Outside Equipment Repairs 457.33

Credit Card bill paid immediately:
GF Checking acct. 801.01
Credit Card 801.01

June Statement credit applied
Credit Card 457.33
Outside Equipment Repairs 457.33

Credit card only used once in June for a phone payment of 25.68 so the statement shows a credit in our favor of $431.65 which isn't going to reconcile favorably, and there is leftover unused credit to be applied to future purchases.

I am unsure how to get the card to reconcile.

The Transaction that the Credit Card's credit should have looked like this: (fund account numbers are examples)

01-2410-000 Credit Card Liab DB 457.33 (credit to credit card account)
01-5540-000 Equipment Maint CR 457.33 (funds 'returned' to expense account - lowers yearly expense)

When the credit card was used for the phone payment that entry should have looked like this:

01-2410-000 Credit Card Liab CR 25.68
01-5610-000 Phone DB 25.68

When you reconcile ... the credit card statement, you reconcile using account 01-2410-000, the data entered is basically the same as you would for your bank account EXCEPT ... when you enter the balance per statement you're going to enter a -431.65, which then will balance after you 'clear' the original credit entry, and the phone payment.

Does this help?


FWIW ... this is why using a liability account for credit cards makes so much sense.
1. You immediately enter the expense into the system
2. You immediately show the liability
3. You can easily reconcile the statement
4. You can easily tell if the card use was unauthorized or if there was a receipt not properly turned in, assuming you have the proper controls in place
5. You can easily account for any credit received on the card, and properly account for the refund to the proper expense account