Journal Entry for Credit Card Transactions

[jordan2k510]

Our credit card was recently compromised (several unrecognized purchases). The CC company recommended that we pay the full amount in order to avoid finance charges. The credits would be issued on the next month's bill. I have created the journal entry placing these unrecognized charges in misc expense. My question is next month when I need to remove these from misc expense what account will I debit?

[Jeff]

Next month your entry would look something like:

Misc expense - CR for amount of credits for fraudulent charges
Cash - CR for difference between credits issued and current charges
regular expense accounts - DB for new charges to the credit card

[jordan2k510]

next month I will have to write a check for the balance on the CC statement. If I only credit the difference how will I reconcile the checking account?

[Jeff]

For example say the bank issued you a credit for $500. This month your total authorized charges are $1000 giving you a total credit card bill this month $1,500.

You entry for this month would.

Checking Credit 1,500
Expenses for authorized charges Debit 1,000
Misc Expense for unauthorized charge Debit 500

Next month if you credit card bill comes to $750. $500 of this will be covered by the credits for the unauthorized charges. Your entry would look like:

Checking Credit 250
Misc Expense Credit 500
Expense accounts for next month charges debit 750

You bank statement will show a $1,500 check this month and a $250 check next month and you should be able to reconcile withoug any problems.

[jordan2k510]

Thank Jeff. Your explanation eliminates my concern.