Reconciling credit card

[GEBCbookkeeper]

I just set up the credit card payable account so I can reconcile the bill. However, for some reason our previous bookkeeper was not paying the new balance each month, but only paying the new purchases. This goes back many many months, so we just want to put that difference in the General Fund and be able to move forward from here. How would I go about creating a transaction that will show up in the credit card reconciliation list that would make that happen?

[NeilZ]

I just set up the credit card payable account so I can reconcile the bill. However, for some reason our previous bookkeeper was not paying the new balance each month, but only paying the new purchases. This goes back many many months, so we just want to put that difference in the General Fund and be able to move forward from here. How would I go about creating a transaction that will show up in the credit card reconciliation list that would make that happen?

When you setup the account, it should have been a liability account, and all purchases are entered crediting the liability, and the debiting the proper expense account. These should show up on the credit card statement. I would check those off, and that should bring the liability account's reconciliation to zero.

Then create the invoice using the full amount listed on the statement, credit the checking account as usual, debit the liability account for the new purchases, and debit an expense account (if you have a miscellaneous expenses account I'd use that) for the part of the statement that was carry over. This will clear the bill, and properly reconcile the liability account.

[GEBCbookkeeper]

I just set up the credit card payable account so I can reconcile the bill. However, for some reason our previous bookkeeper was not paying the new balance each month, but only paying the new purchases. This goes back many many months, so we just want to put that difference in the General Fund and be able to move forward from here. How would I go about creating a transaction that will show up in the credit card reconciliation list that would make that happen?

When you setup the account, it should have been a liability account, and all purchases are entered crediting the liability, and the debiting the proper expense account. These should show up on the credit card statement. I would check those off, and that should bring the liability account's reconciliation to zero.

Then create the invoice using the full amount listed on the statement, credit the checking account as usual, debit the liability account for the new purchases, and debit an expense account (if you have a miscellaneous expenses account I'd use that) for the part of the statement that was carry over. This will clear the bill, and properly reconcile the liability account.

Got it. So my mistake is obviously using the credit card balance for the reconciliation rather than what we actually spent. So once I change that and it balances, the discrepancy is recorded when I enter the invoice in A/P. That all makes more sense - thank you!

[NeilZ]

Got it. So my mistake is obviously using the credit card balance for the reconciliation rather than what we actually spent. So once I change that and it balances, the discrepancy is recorded when I enter the invoice in A/P. That all makes more sense - thank you!

I would definitely add as much information in the invoice comment/notes area about why the 'miscellaneous' account is being used for part of the invoice. I do realize that this 'carry over' was probably purchases made for a few different ministries, but that data is probably hard to find, if not lost to history. So you want to put as much information in the notes to satisfy any future audit.

[GEBCbookkeeper]

Got it. So my mistake is obviously using the credit card balance for the reconciliation rather than what we actually spent. So once I change that and it balances, the discrepancy is recorded when I enter the invoice in A/P. That all makes more sense - thank you!

I would definitely add as much information in the invoice comment/notes area about why the 'miscellaneous' account is being used for part of the invoice. I do realize that this 'carry over' was probably purchases made for a few different ministries, but that data is probably hard to find, if not lost to history. So you want to put as much information in the notes to satisfy any future audit.

Will do. Thanks again for the help!

[GEBCbookkeeper]

Got it. So my mistake is obviously using the credit card balance for the reconciliation rather than what we actually spent. So once I change that and it balances, the discrepancy is recorded when I enter the invoice in A/P. That all makes more sense - thank you!

I would definitely add as much information in the invoice comment/notes area about why the 'miscellaneous' account is being used for part of the invoice. I do realize that this 'carry over' was probably purchases made for a few different ministries, but that data is probably hard to find, if not lost to history. So you want to put as much information in the notes to satisfy any future audit.

Will do. Thanks again for the help!

Revisiting this....this transaction is not balancing. What I'm understanding in your message is to do the following transaction:

Invoice amount $$5817.02 (new balance from statement)
CR 01-1110 Checking $5817.02 (statement balance)
DB 01-2015 Credit card liability $6654.61 (new purchases)
DB Expense account $837.59 (carryover credit amount)

Did I misunderstand your instructions above?

[NeilZ]

Revisiting this....this transaction is not balancing. What I'm understanding in your message is to do the following transaction:

Invoice amount $$5817.02 (new balance from statement)
CR 01-1110 Checking $5817.02 (statement balance)
DB 01-2015 Credit card liability $6654.61 (new purchases)
DB Expense account $837.59 (carryover credit amount)

Did I misunderstand your instructions above?

Maybe. The statement is showing 5817.02, you're debiting the liability account for 6654.61. I suspect that there are purchases showing in the liability account that are not on the credit card statement as they occurred after the closing date of the statement.

You should do this:

1. Use the statement to 'reconcile' the credit card liability account. Use the NEW PURCHASES total on the statement as the 'statement balance' in the reconcilation, NOT the statement balance. You should get a 0.00 difference after you tick off and reconcile the purchases.
2. So enter the transaction as follows - example is using fake numbers

01-1110-000 Checking CR 5817.02
01-2015-000 CC Liab DB 5000.00 <-- New Purchases total from statement
01-5100-000 Misc Exp DB 817.02

[GEBCbookkeeper]

Revisiting this....this transaction is not balancing. What I'm understanding in your message is to do the following transaction:

Invoice amount $$5817.02 (new balance from statement)
CR 01-1110 Checking $5817.02 (statement balance)
DB 01-2015 Credit card liability $6654.61 (new purchases)
DB Expense account $837.59 (carryover credit amount)

Did I misunderstand your instructions above?

Maybe. The statement is showing 5817.02, you're debiting the liability account for 6654.61. I suspect that there are purchases showing in the liability account that are not on the credit card statement as they occurred after the closing date of the statement.

You should do this:

1. Use the statement to 'reconcile' the credit card liability account. Use the NEW PURCHASES total on the statement as the 'statement balance' in the reconcilation, NOT the statement balance. You should get a 0.00 difference after you tick off and reconcile the purchases.
2. So enter the transaction as follows - example is using fake numbers

01-1110-000 Checking CR 5817.02
01-2015-000 CC Liab DB 5000.00 <-- New Purchases total from statement
01-5100-000 Misc Exp DB 817.02

The reconciliation I did without a problem, using the New Purchases amount from the statement. I double & triple checked all receipts against the statement and there were no issues. But because the amount owed that I paid to the credit card is LESS than the new purchases, the invoice I'm trying to enter isn't working. The two debits are more than the one credit. Are you saying in your last message that I should make the debit to the CC Liability account LESS than what it actually is, or is that going to create an incorrect balance in that account? Sorry if I'm making you repeat yourself, but I'm just not clear how to do this and make everything balance.

[NeilZ]

Maybe. The statement is showing 5817.02, you're debiting the liability account for 6654.61. I suspect that there are purchases showing in the liability account that are not on the credit card statement as they occurred after the closing date of the statement.

You should do this:

1. Use the statement to 'reconcile' the credit card liability account. Use the NEW PURCHASES total on the statement as the 'statement balance' in the reconcilation, NOT the statement balance. You should get a 0.00 difference after you tick off and reconcile the purchases.
2. So enter the transaction as follows - example is using fake numbers

01-1110-000 Checking CR 5817.02
01-2015-000 CC Liab DB 5000.00 <-- New Purchases total from statement
01-5100-000 Misc Exp DB 817.02

The reconciliation I did without a problem, using the New Purchases amount from the statement. I double & triple checked all receipts against the statement and there were no issues. But because the amount owed that I paid to the credit card is LESS than the new purchases, the invoice I'm trying to enter isn't working. The two debits are more than the one credit. Are you saying in your last message that I should make the debit to the CC Liability account LESS than what it actually is, or is that going to create an incorrect balance in that account? Sorry if I'm making you repeat yourself, but I'm just not clear how to do this and make everything balance.

Based on your original post .. your previous bookkeeper was only paying on new purchases, not on the total balance. I'm now assuming that the statement would have a carried balance of some amount, along with the new purchases.

In the transaction I entered above, I'm assuming that the new purchases totaled 5,000.00. The statement showed a previous balance of 817.02. I'm also assuming that your Credit Card Liability account, if its being updated properly, will have purchases that occurred AFTER the cut-off date on the statement. SO there will be additional amounts showing in that account.

However you should NOT be taking all the funds from the liability account to pay the statement. You have to expense the rest from the miscellaneous expense account. This is only being done to clear the standing balance. The remaining amount in the liability account will be used to account for the next statement. There will probably be a balance in the account after that payment too.

[GEBCbookkeeper]

Maybe. The statement is showing 5817.02, you're debiting the liability account for 6654.61. I suspect that there are purchases showing in the liability account that are not on the credit card statement as they occurred after the closing date of the statement.

You should do this:

1. Use the statement to 'reconcile' the credit card liability account. Use the NEW PURCHASES total on the statement as the 'statement balance' in the reconcilation, NOT the statement balance. You should get a 0.00 difference after you tick off and reconcile the purchases.
2. So enter the transaction as follows - example is using fake numbers

01-1110-000 Checking CR 5817.02
01-2015-000 CC Liab DB 5000.00 <-- New Purchases total from statement
01-5100-000 Misc Exp DB 817.02

The reconciliation I did without a problem, using the New Purchases amount from the statement. I double & triple checked all receipts against the statement and there were no issues. But because the amount owed that I paid to the credit card is LESS than the new purchases, the invoice I'm trying to enter isn't working. The two debits are more than the one credit. Are you saying in your last message that I should make the debit to the CC Liability account LESS than what it actually is, or is that going to create an incorrect balance in that account? Sorry if I'm making you repeat yourself, but I'm just not clear how to do this and make everything balance.

Based on your original post .. your previous bookkeeper was only paying on new purchases, not on the total balance. I'm now assuming that the statement would have a carried balance of some amount, along with the new purchases.

In the transaction I entered above, I'm assuming that the new purchases totaled 5,000.00. The statement showed a previous balance of 817.02. I'm also assuming that your Credit Card Liability account, if its being updated properly, will have purchases that occurred AFTER the cut-off date on the statement. SO there will be additional amounts showing in that account.

However you should NOT be taking all the funds from the liability account to pay the statement. You have to expense the rest from the miscellaneous expense account. This is only being done to clear the standing balance. The remaining amount in the liability account will be used to account for the next statement. There will probably be a balance in the account after that payment too.

Yes that's correct, however, it's been carrying a CREDIT balance. I'm guessing way WAY back there was a credit of some sort that wasn't accounted for, and since the bookkeeper was paying only new purchases, she was always paying MORE than what the bill was. I sincerely apologize, going back over my messages I realize I was not clear on that, hence the confusion on my part. So, the amount we owed according to the current statement was $5817.02. But the new purchases exceeded that in the amount of $6654.61 - the receipts totalling that amount were all posted to the CC liability account and reconciled correctly.

[NeilZ]

Yes that's correct, however, it's been carrying a CREDIT balance. I'm guessing way WAY back there was a credit of some sort that wasn't accounted for, and since the bookkeeper was paying only new purchases, she was always paying MORE than what the bill was. I sincerely apologize, going back over my messages I realize I was not clear on that, hence the confusion on my part. So, the amount we owed according to the current statement was $5817.02. But the new purchases exceeded that in the amount of $6654.61 - the receipts totalling that amount were all posted to the CC liability account and reconciled correctly.

DOH .... OK this is what you do.

Easy to fix:

Two separate transactions:

1. In Accounts Payable, create a normal invoice for the amount of the Credit Card Statement

01-1110-000 CR 5817.02
01-2015-000 DB 5817.02

This takes care of the bill. We next take care of the credit

2. In Funds Accounting we need to reflect the credit. Unfortunately, unless you know what expense the credit was originally for, you'd have to use a Miscellaneous account, however if you DO know what expense the credit was against, use that

01-2015-000 DB 837.59
01-5400-000 CR 837.59 - Misc Expen

This will clear out the new purchases paid for by the credit.

Again, before you try this, do a backup of the accounting database so you can revert if this does not appear correctly.

[GEBCbookkeeper]

Yes that's correct, however, it's been carrying a CREDIT balance. I'm guessing way WAY back there was a credit of some sort that wasn't accounted for, and since the bookkeeper was paying only new purchases, she was always paying MORE than what the bill was. I sincerely apologize, going back over my messages I realize I was not clear on that, hence the confusion on my part. So, the amount we owed according to the current statement was $5817.02. But the new purchases exceeded that in the amount of $6654.61 - the receipts totalling that amount were all posted to the CC liability account and reconciled correctly.

DOH .... OK this is what you do.

Easy to fix:

Two separate transactions:

1. In Accounts Payable, create a normal invoice for the amount of the Credit Card Statement

01-1110-000 CR 5817.02
01-2015-000 DB 5817.02

This takes care of the bill. We next take care of the credit

2. In Funds Accounting we need to reflect the credit. Unfortunately, unless you know what expense the credit was originally for, you'd have to use a Miscellaneous account, however if you DO know what expense the credit was against, use that

01-2015-000 DB 837.59
01-5400-000 CR 837.59 - Misc Expen

This will clear out the new purchases paid for by the credit.

Again, before you try this, do a backup of the accounting database so you can revert if this does not appear correctly.

that makes perfect sense!!! Thanks again for all your help. I'm sure it won't be the last.