Credits for refunds on credit card statement

[dishman2000]

I have a credit for refund for rental equipment on my current credit card statement, so the total outstanding balance for the card is LESS than the total charges because of the refund. When I entered all the transactions into Accounts Payable to enter the payment into PowerChurch, I got an "error" stating that the total credits and debits were more than the amount of the check written (because of the refund on the statement). Is this OK? It let me save the transaction, but I wanted to make sure I'm not doing something wrong before I post the transaction. The total to be paid on the balance of the card is about $4,500, but the total amount charged was a little over $5,000.

[NeilZ]

I have a credit for refund for rental equipment on my current credit card statement, so the total outstanding balance for the card is LESS than the total charges because of the refund. When I entered all the transactions into Accounts Payable to enter the payment into PowerChurch, I got an "error" stating that the total credits and debits were more than the amount of the check written (because of the refund on the statement). Is this OK? It let me save the transaction, but I wanted to make sure I'm not doing something wrong before I post the transaction. The total to be paid on the balance of the card is about $4,500, but the total amount charged was a little over $5,000.

How do you have the credit card set up, as a liability?? Did you refund the amount to the original expense account and the liability account? This would be done either with a negative invoice in Accounts Payable (which is preferred as it keeps the AP data in synce) or involve a Fund Accounting transaction.

You should have done this first, and posted it to Funds Accounting, then the reconciliation of the card would have been correct.

[dishman2000]

I haven't been entering the charges as a liability before paying the credit card balance. I usually pay the bill online and create a "Manual check" that credits the asset checking account and then debits each Expense Account with the amount charged on the statement. That may not be the most "proper accounting" way to do it, but I just don't spend the time creating individual liabilities every time the card is used when they will be settled within 30 days and costed to the proper account. I see this as no different than creating an "invoice" for a bill at the time the check is written to pay it instead of creating multiple invoices and then running a batch of checks once a month. Our bills all come due at different times of the month, so when we get a bill, we create an invoice in PowerChurch and immediately print the check and mail it to the vendor (if it requires a paper check). Most of the bills are paid online, so I create a Manual Check using the date that the bill was paid from the bank account so my PowerChurch transactions match the date on the Bank Statement. That may not be doing it correctly, but we are a small church and only pay about 10-20 transactions on the credit card and another 10-20 bills each month.

[NeilZ]

I haven't been entering the charges as a liability before paying the credit card balance. I usually pay the bill online and create a "Manual check" that credits the asset checking account and then debits each Expense Account with the amount charged on the statement. That may not be the most "proper accounting" way to do it, but I just don't spend the time creating individual liabilities every time the card is used when they will be settled within 30 days and costed to the proper account. I see this as no different than creating an "invoice" for a bill at the time the check is written to pay it instead of creating multiple invoices and then running a batch of checks once a month. Our bills all come due at different times of the month, so when we get a bill, we create an invoice in PowerChurch and immediately print the check and mail it to the vendor (if it requires a paper check). Most of the bills are paid online, so I create a Manual Check using the date that the bill was paid from the bank account so my PowerChurch transactions match the date on the Bank Statement. That may not be doing it correctly, but we are a small church and only pay about 10-20 transactions on the credit card and another 10-20 bills each month.

Using the liability account does a few things, one is allow you to properly cover any credit such as you have here, and properly expense the purchase in the month it was purchased. This is not an 'individual liability' but just an entry via Accounts Payable DEBITING the proper expense account, and CREDITing the liability account. There is no printing of 'checks' just posting to Fund Accounting

Then when you get the credit card bill, you would reconcile it as you would the bank account, insuring that you have all the purchases entered. This also requires anyone using the credit card to properly get a receipt and drop it off for proper accountability and audit trail.

That said, if you entered all the transactions from the credit card bill, you should have entered a line that debited checking and credited the original expense account. That would clear up the issue with your error.

[sgbani]

I will mention that historically our church did not utilize the liability account method for credit cards. Instead, they used a singular AP entry to expense all the transactions to their appropriate expense accounts.

The issue I had with this approach is that their old method did not indicate to WHOM we were spending the money with, as it always listed the credit card issuer as the vendor.
to me, this was the most important part I wanted changed.

Plus, they historically put the transactions in the month the CC bill was paid, not when items charged. So, the expense accounts were always behind from reality.

We are in the same boat as you:
A small church with ~20-30 CC transactions a month, and <20 bills per month to pay.

We have since switched methods to the method Neil describes, and use liability account method and enter all credit card transactions as their own AP entry (manual check), which credits the credit card liability account and debits the expense account, just as Neil described. Then, a singular AP entry to the credit card issuer for the proper date of payment.

The advantage in this method is the balance sheet and other reports clearly indicate a credit card liability that needs to be paid from the previous month, such that the expenses incurred for that month are properly attributed to that month, and we can keep better track of which vendors we are paying with the credit card.
Again, this is something I felt very important to keep track of.

For refunds, it can be entered as an AP entry such that the debit / credit accounts are swapped (a negative invoice so to speak), so we can see how much is paid for a specific vendor taking into account refunds. For rewards, we would put that as part of the AP entry for the credit card payment, such that in one AP entry, I can see all the debits / credits add up and factors in the rewards amount.
Yes, an error comes up that indicates the total debits / credits do not equal the invoice value. This is expected.

Yes, it is more data-entry, but knowing exactly who we are paying (and for what) using the credit card is important to keep track of.

To help keep this all straight, I created a spreadsheet that I can simply download all the CC transactions into, and then add in the vendor ID's and appropriate debit/credit accounts for each transaction. Then, it just becomes data entry into PC+.
I can add the transaction data, setup the CC payment, reconcile the card, all during the same session.

Switching to the liability account method is only rough for the first month, then it becomes easier.
I highly suggest consider moving to this method of CC entry methods. You may only have 10-20 transactions at the moment, but I would rather spend more time entering data for CC transactions as I move more bills to using the CC, than printing physical checks or setting up EFT / ACH payments.

You just have to create a liability account, label it credit card, and ensure it is available for all funds that would use the credit card. Then, when entering each CC transaction, you do exactly as Neil described, credit the newly created liability account, debit the expense. Then, a singular entry for the card payment that wipes out the liability amount, and credits the appropriate asset account that will pay the card. Reconcile the CC liability account just like a bank account, and everything is nice and neat.
More data-entry? yes.
One more reconciliation? yes.
But, it makes life easier when you have to go back and find out how much was paid out to specific vendors or other audit actions.