Credit Card Accounts in Bookkeeping Software

This assumes you are able to get a credit card in the business’s name, but just starting out, you may not be able to get one. If you can’t, one other thing you could do is use a personal credit card that has a zero balance owed on it and only use it (from this point forward) for business purposes. It is really important that you keep personal and business transactions in separate accounts. Here’s why, if you are audited by the IRS and they find that you have mixed the two, they can deny all of your business expenses as deductions on your tax return. So you will owe more in taxes, penalties, and interest. Also, mixing them makes it impossible to reconcile your credit card account in the bookkeeping software.

Credit card charges and payments are treated differently than bills and bill payments. Your bookkeeping software will have a separate area for credit card charges to be entered. This is because you might make minimum payments on a credit card and not pay the balance in full and need to keep track of what is still owed. You need to set up each credit card with its own account in the chart of accounts and number it in the 2 section, and 4 or 5 digits depending on your naming convention. Also, each card will have a separate vendor and you will set those up individually in the Vendor section.

Go to the area for entering credit card charges and enter them as they occur, or when you get the statement from the credit card company. Most of your transactions will be charges, which increase the balance owed. At the top of the window, you will notice a button to check off when it is a credit amount. This would be used for a sales return or if points were applied to the balance owed. You would click that button and enter the credit amount without a minus sign in front of the amount. The bookkeeping software knows to subtract it from the balance owed. Afterwards, be sure to click the charge button again so that you will record charges and not more credits. That button stays wherever you have set it until you change it again.

When it is time to make a payment on the credit card, you will use the Write Checks function and make it out to the bank in question for the amount you choose. You will choose the credit card account in the lower section. You cannot use the Bill Pay function to pay a credit card because no bills have been entered. You also do not want to assign the payment to an expense account because you have already entered all the transactions into expense accounts prior to this. Now you are simply making a payment to lower the balance on the credit card. You can choose to print a check or not, if you paid it online.