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Credit Card Reconciliation Tips in QuickBooks

Is the credit card liability on your organization’s balance sheet accurate?

Credit card accounts should be reconciled each month just like your bank account.

Options for Reconcile Date

You can reconcile to the credit card statement, or you can reconcile to the balance at month end per the history in online banking. If you use the credit card statement, you should reconcile to the statement ending in the month following the month you are working on. For example, if you are working on the December books, reconcile to the credit card statement ending in January. Let’s say the card statement cutoff date is the 11th. If you only reconcile to the Dec. 11 statement, you’d have a span of activity, December 12 – 31 to be exact, that is not reconciled. You don’t want to risk overlooking an error during that time period.

If your card statement closes late in the month and you need the books wrapped up before the latest statement is available, you can also spot check the unreconciled days to make sure nothing looks amiss.

Easier Than Bank Reconciliations

Generally reconciling credit card accounts is much easier than bank accounts since you don’t have to deal with outstanding checks. Sometimes you have a transaction or two that crosses the end of the statement cycle, but that’s about it for outstanding transactions. If you see old outstanding transactions on a credit card reconciliation, you know you have accounting errors to clean up.

A Common Mistake

One common mistake we see is entering the credit card payment made from the bank account twice – once from the bank side and again from the credit card side. If you add the credit card payment from the downloaded bank transactions, be sure to match the transaction in the credit card bank feed, or vice versa. To avoid confusion, you may want to manually enter the transfer of cash from the bank to the credit card account, then match the transaction in the operating account bank feed and match it again in the credit card bank feed.

Multiple Employee Cards

Some of our clients use credit cards where several individuals are assigned unique cards. In this case you will need to link each card separately in online banking to a separate account in the chart of accounts. For example, you may have credit card type accounts in your chart of accounts that look like this:

Wells Fargo Credit Card

WF Card – Maya

WF Card –  Jenn

WF Card –  Ben

In this example, the master card account administrator is Maya. Each person’s card purchases flow through to the individual card account. Payments on the card, however, only flow through to Maya’s card. You will see a negative balance begin to develop on Maya’s card since that card is getting credit for all the payments. You can either edit the payment to spread it to the various accounts, or do a journal entry to reallocate the individual card balances.

In a case like this with multiple cards linked on one master account, we suggest reconciling the parent account, Wells Fargo Credit Card, instead of doing a reconciliation on each individual card.

Steps to Reconcile a Credit Card

To do a credit card reconciliation using the card statement, first agree total card credits (payments on the card and credits from vendor refunds) per the card statement to the total payments and credits showing per the total in the reconciliation window in QuickBooks.  If the two amounts do not agree, compare each card payment and credit in QuickBooks to the statement to make sure you have all the cleared transactions checked off.

Next agree total purchases per the card statement to total charges per the bank reconciliation in QuickBooks.  If the two amounts do not agree, look at transactions that took place at the very end of the month per the statement to make sure all transactions are entered.

Download Hiccups

Once in a while for whatever reason a credit card charge does not download. If you need to add a card purchase manually, you can enter a new transaction or double click to open an existing card purchase, then duplicate the transaction. (In QuickBooks desktop, right click on a transaction to find the duplicate option, in QuickBooks Online click More at the bottom of the transaction window, then Copy.)

Also occasionally a card purchase will download twice. You may see a description on the first entry of “pending” while the second download occurrence is the final transaction. If this happens, simply delete one of the entries. Deleting a transaction that was added from the bank feed will put it back into the bank feed, so you will also need to go back into the bank feed and select the transaction, then under Batch Actions select to exclude the transaction.

Once cleared credits and card charges in QuickBooks agree to the card statement, you can complete the reconciliation. The only outstanding transactions, if any, should be transactions that cross the statement end date. Anything dated earlier is an error and should be cleaned up before you finalize the reconciliation.

That’s it! Reconciling credit card accounts should be a quick and easy process, especially if you’ve followed the steps in the prior post, A Right Way and a Wrong Way to Enter Credit Card Purchases, to import your credit card transactions.

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