Many people make the common mistake of not tracking their credit cards in QuickBooks. Normally, what these people do, is when they get the credit card bill, they enter it as a bill in QuickBooks software and hit multiple expense accounts based on the charges for the month.
Although this example is not incorrect, the problem is that you are not tracking a true Accounts Payable. Wouldn’t it be nice to know that although you may have $100,000.00 in the bank, you have $50,000.00 worth of credit card bills coming to you?
Here is a better way – In your Chart of Accounts, create an account called “Credit Card Payable.” Choose “Credit Card” as the account type. Then for each individual business credit card account that you have, create a Sub-Account to Credit Card Payable. I usually name these accounts with the type of card and the last 4 digits.
Once you have these accounts setup, now all month long you can start tracking your Credit Card debt. Not only does this turn on the opportunity to pay bills by credit card in the “Pay Bills” screen, but you can also now track your Point of Sale purchases on your card. For example, you go to Staples and buy a stapler for $5.00. You use your business Amex card. Now in QuickBooks software, you can go to Banking>Enter Credit Card Charges. Enter in the charge and post it to “Office Supplies”.
Now you will see that in your Chart of Accounts, you are showing $5 worth of Credit Card Liability. Do this all month long to accumulate your payable. By the time your credit card bill comes in the mail, you should have a pretty accurate # of how much that bill will be.
Now, since you have the bill in hand, you can reconcile your Credit Card account, and once you are done with that, QuickBooks software will either enter a Bill for you or a Check depending on which one you choose. When QB enters in that transaction, the account that it hits will be the Credit Card Account for that particular card therefor reducing your liability.