Accounting Treatment For Credit Card Transactions – This Tip Contains Guide On How To Use QuickBooks Journal Entries For Credit Card Sales, Merchant Fees, Payments And Expenses
Unlike a normal business transaction carried out face to face, a credit card transaction involves the use of a payment card number, and pin issued by a provider to make payment online. For instance, you can order a product from merchants’ store using MasterCard or Visa Card to make payment.
As a business owner, it is important for you to treat credit card transactions the way you record your banking transactions. But, you need to be sure that the card is not attached to a bank already tracked in a separate account for the transaction.
Here are accounting treatment of Credit Card transactions:
Credit Card Sales
For merchants that accept payment card on their websites, you can integrate third party applications to sync your online sales into an accounting software. Whether you have such technology in place or not, here is the general treatment of card sales in QuickBooks.
For cash sales, CR Sales account and DR your Credit Card account with the amount received online. On the other hand, if the transaction is a credit sale, CR Sales account and DR your account receivable account with the value of the invoice.
Most times, your card provider may charge applicable merchant fees which could be fixed or a standard percentage of the transaction value, not recognising these fees may overstate your profit figure, hence, you need to CR your Credit Card account and DR Credit Card Charges account with the amount deducted as a transaction fee.
Credit Card Payment
Another treatment of credit card transactions is when you make payment or shop online from a merchant store and are being charged the transaction value upon successful order, the accounting treatment is to CR your Credit Card account and DR your inventory account ( for online purchases) or DR and expenses account.
Hope you find this accounting treatment for credit card transactions useful? Read more tips on accounting treatment for business transactions here