If you use QuickBooks for your accounting, I suggest you use the following method to record credit card charges, especially if that is your primary payment method. This method is especially useful if you do not pay your credit card bill in full every month.  Here is the best way to record charges:

1.  If you have a newer version of QB, there will be an icon on your main QB page that says "Enter Credit Card Charges" or to get to it manually, you can click on Banking in the top menu, then Enter Credit Card Charges.

2.  Pick the correct credit card from the drop down menu at the top.  Make sure the correct bubble is checked for a Charge or a Credit.

3.  Fill in the Purchased From (you can select from your current list of vendors, or add a new one).  Anyone you pay, especially for services, should be a Vendor.  If it is someone you pay for services, please make sure you set up the vendor as eligible for a 1099, even if you don't have their ID number right now, you can set it up later.  This will be critical at year end when you need to produce 1099s.

4.  For the date, use the date of the transaction, which should be printed on your statement.  Type in the amount of the charge, and a memo if you want to add more detail.

5.  The Account field is also very important to your accounting.  Most of what you charge will be expenses, however, if you are purchasing equipment, furniture, software, computers, etc. that cost over $500, you will need to pick a Fixed Asset account.  These items need to be classified this way so that you can take a deduction for the depreciation at year end.

6.  The other great thing about recording your charges this way is that you can code the expense to a particular Customer (or Job) and it can be billed out later.  You can also classify your purchases by Class if you use that feature.

Here is a screen shot of the Enter Credit Card Charges screen in QB 2006:



I have found this to be the best way to record all your charges and keep track of your credit card balance.  It also allows you to "reconcile" your credit card every month when you get your statement.  When you make a payment, simply code it to the account for the Credit Card and it will get recorded in that register as well, and be reflected in the balance.  This is a helpful, useful, clean way to record your expenses and other charges.  Plus, if you pay vendors using this system, you can keep track of what you have paid them and make sure you don't overpay.

If you have any additional questions on this process, or any other accounting issues, please leave a comment here or e-mail me directly at teresa@winning-edge.net.  I look forward to your comments and helping you succeed in your business.