Dustin Wheeler

Dustin Wheeler
Dustin is a technology-driven CPA in Orem, Utah.

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Accounting for Credit Card Transactions in QuickBooks: What May Seem Easier is Harder

I have observed people using two methods of handling credit card accounts in QuickBooks:

  1. Recording individual credit card charges in a liability account (set up in the chart of accounts as the Credit Card type). Payments decrease the liability balance.
  2. Recording only the payments for the credit card and allocating the charges among many different expense categories (using splits in the write checks screen as shown below). No liability account exists for the credit card.

On rare occasions, I have seen other techniques, such as running the credit card expenses through accounts payable, but the two listed above are the most common.

I have asked those using method #2 why they chose to record credit card transactions that way, and the answer is usually that they were unaware of any other way of doing it or that they thought it would be easier than method #1. Some say, “Why should I enter every single credit card charge when I can account for all of the charges in one transaction?”

I concede that method #2 works okay when credit cards are paid in full every month, because each payment can be traced to the sum of the transactions on the statement. However, when cash suddenly becomes tight and the company can’t pay the credit card bill in full, you have to allocate, for example, $1,697.45 of credit card charges to a $200 payment. For each partial payment after that, you have to keep track of what transactions you’ve recorded so far and allocate a new set of expenses. This quickly becomes an accounting nightmare that you will experience every time you enter a payment!

There is a second problem with method #2. How is your CPA supposed to know what the year-end balance is on your credit card? It won’t show up in your QuickBooks file. You’ll have to give your CPA the credit card statements and help him or her classify the unrecorded transactions.

I strongly encourage method #1. It handles partial payments of credit card balances painlessly. It makes your QuickBooks file easier for your CPA to work with. Also, if you enter the transactions from your credit card receipts, you will always know how much you owe on your credit card by looking at the account in QuickBooks and you can reconcile the account to make sure all of the charges were processed correctly.

It might seem tedious to enter every credit card charge, but it will probably save you time later!

If you are a client (or a potential client) and want to improve your recording of credit card transactions, do not hesitate to contact me.

(Note: If you still have your heart set on recording the expenses from a credit card statement in one big split transaction in QuickBooks, my recommendation is to set up the credit card account in QuickBooks, as in method #1, and enter the big split transaction from the statement using the “Enter Credit Card Charges” window instead of the “Write Checks” window)

67 comments to Accounting for Credit Card Transactions in QuickBooks: What May Seem Easier is Harder

  • Use Method #1. Method #2 always ends up a mess…sooner or later.

  • Great article, Dustin!!

    I would add:

    1) If you are using Method 1 (which I, also, recommend), and you reconcile the statement in Banking>Reconcile, DO NOT enter a bill when prompted!!! This reeks havoc with your system. Simply post the check for the amount that you are paying using the credit card account on the expense tab.


    2) If you are using Method 2 and enter one charge for the entire statement, you will run into problems at year-end. The charges for one fiscal year should be expensed in that year, not as of the statement date. Therefore, the work-around is to draw a line on your statement and post all of the charges as of that fiscal year end in one transaction and enter a separate charge transaction for the postings dated in the next fiscal year.

  • Excellent advice Laura. Thank you.

  • Dustin –

    I also agree that Method 1 is the way to go, but for those that think it is way too tedious to enter each transaction, I would encourage them to take this shortcut: download the QuickBooks WebConnect file once a month when their statement comes out. I would just account for my credit cards once a month when this file is available for the period.

    That way all I have to do is assign each transaction to an expense or asset account rather than enter the whole transaction. And when QuickBooks notices that every transaction to “Fill ‘R Up” seems to be for Gasoline, it will start to suggest that expense account and all I have to do is click OK on it.

  • Did not know (or I chose not to know???) of the existence of option 2… 100% agree with you that method 1 should be used. It’s a liability account, treat it that way. Great post Dustin. ps. WebConnect file works pretty well especially after setting up some rules with it – way to go Shane.

  • Option #3 – the freakin’ cloud. Here is what we use for our firm and deploy for clients…

    I take pictures of my credit card receipts, send them to my shoeboxed account, which dumps them into my bill.com account, which dumps them into my QuickBooks account. Works like magic (basically, it does Method #1 without you keying any data in at all).

    So sweet…

  • Will

    You’re leaving off a more commonly used third type of entry – entering the Credit Card bill as an Accounts Payable. I find this method much more convenient than #1. I think the A/P feature in QB is good, it gives you a few areas to enter the details of the transaction and then two spaces to enter the date – one for the financial period of the charge and one for the due date. The Credit Card charge feature doesn’t offer spaces for two dates, and also expects you to reconcile each month, which I think only leads to more confusion. Most people understand the A/P feature and should just stick to it when entering credit cards.

    And you don’t have to enter all your transactions. It’s much more convenient to group expense into their respective expense account (i.e. total the office supply charges and enter the one total, not each individual purchase).

    Finally, if you are only making a partial payment, when you go to “Pay Bill” enter the “Amount to Pay” in the right-hand column. Next time you open the “Pay Bill” feature, the reduced balance will show.

  • Just a Note/Heads Up: Sometimes I come across clients who like to enter the amount or balance due from their Credit Card as a Payable so as to allow them to track that amount and due date in QB.

    However using this method leads to inaccuracies in their financial statements, specifically Cash Basis reporting. This occurs because A/P (as well as A/R) are to use only operating accounts (or items linked to operating accounts) and not balance sheet accounts. Using balance sheet accounts (such as reclassing balances/amounts due from their CC to A/P)will report that as a debit balance in A/P on a Cash Basis statement depending on the timing of the transfer and payment.

    This was pretty easy to spot and adjust when closing the period, however when clients create items linked to balance sheet accounts which are used on Invoicing and/or Bills, it can be quite a task to trace and adjust. My suggestion is to run an items report, sorted by account, and identify all items linked to non operating accounts.

  • Elizabeth Bushnell

    Wonderful article, very easy to understand even for an amateur like me. I was wondering if you could tell me, because no one else I’ve talked to seems to know, if you have a credit card in use at the starting date of your quickbooks accounting, what do you enter for the beginning balance? Lots of people have told me zero, but that can’t be right, can it? Thanks in advance.

  • Elizabeth, you could make a journal entry for the credit card’s beginning balance and reconcile it along with the other transactions for the first month. Since I’m not familiar with your business and situation, you may want to consult with your tax advisor or seek out help from a competent QuickBooks ProAdvisor in your area to determine exactly what accounts the journal entry should adjust.

  • Terrie

    I too have a question about bringing balances in from prior records/year. I put the balance in when I set up the credit card accounts, however when I go to the vendor account it does now show those amounts outstanding. I’m wondering why and if there is a way to change that. I’m afraid that when I make a payment to the credit card it will end up showing a credit balance on the vendor detail.

  • Hi Terrie,

    Dustin asked me to help you out. I’m worried you’re not recording your credit cards correctly, as you should not have a balance due to your vendors (they’ve been paid by your credit card company). Instead, your balance due should be to your credit card company, reported in QuickBooks under your credit card liability account.

    Here’s a blog blog post I wrote for another CPA’s blog with step-by-step instructions on the right way to record credit cards into QuickBooks. http://www.bethbcpa.com/entering-credit-card-charges-into-quickbooks-the-right-way/

    Hopefully that helps to answer your question. I am more than happy to do a virtual training session with you and help walk you though the steps. Feel free to contact me if you’d like additional assistance. michelle@trailheadaccounting.com or my website http://www.TrailheadAccounting.com Thanks!

    ~Michelle Edwards, CPA

  • Terrie

    I have the processing down, I’m just concerned that there is no outstanding balance due to Visa on my unpaid bills report. I guess they won’t show up on there until I actually create a bill after reconciling the account to the statement. I’ll try it this month and see if it answers my questions, if not, I will get back with you.

    Thank you!

  • The balance due to your credit card company will not show up on your vendor balance detail report (or other A/P reports). However, you can modify the reports to show your credit card outstanding balances due. To do this, click on the “Modify Report” button, then click on the “Filters” tab, and select “Account.” Under the account drop down menu, you can select “All A/P” (which is the default setting), or “All Credit Cards.” To save time you could create a memorized report to show the credit card balances. Depending on how many current liabilities your business has on the books, you could also select the “All Current Liabilities” option too.

    Another quick way to look up your balance due to Visa is to check your balance sheet. The outstanding balance will appear under your liabilities section.

  • Terrie

    This is the first month that I’ve actually had to reconcile the credit card, and I found that the partial payment that I made at the first of the month is not showing up in the reconciliation, so I’m off by that much. Why is it not there?

  • Terrie, open the check for the partial payment and make sure it is assigned to the credit card liability account (not an expense). If it is, it should show up in the reconciliation screen.

  • Teho

    I was the victim of method #2 and had many problems at the end of the year. How do I go about transitioning to method #1?

  • sahar

    Do I still need to use moneris or other companies to post the charge then enter it into QuickBooks or can I just eliminate the cost of Moneris? Thank you.

  • Teho,

    Go to the chart of accounts and create a new account using the type “credit card.” Next, enter all of the past unpaid credit card charges. For the current month you are reconciling, enter the credit card charges and payments. The entries could be complicated, so you may want to seek out the help of a competent QuickBooks ProAdvisor if you need further help.

  • Michael

    i agree with both techniques mentioned above and i thanks you for providing such complex point in very easy way
    thank you
    your sincerely Michael

  • Dawn

    Interesting read. I have a question. I use method one and reconcile my credit card each month. This week we have opened a new company in quickbooks with a separate bank account. Today I wrote a check for the credit card from the new company. All my c/c entries are in the old company (which we will still be using). How do I do this? Will I have to make a journal entry in the new company? How do I track my expenses for each job when the credit card info is in the other company? Any ideas? Thanks. Dawn

  • Hi Dawn,

    I’ve seen this done a couple of different ways. First, you can put all of the credit card expenses in the 1st company and have the 1st company pay the entire credit card bill. Then have the new company write a monthly reimbursement check to the 1st company for their portion of the credit card expenses. In the 1st company’s QB file, any charges to be reimbursed from the new company can be recorded to an Accounts Receivable account titled “Expense Reimbursement from ‘New Company'”. The new company can expense their portion of the credit card statement when they write the reimbursement check to the 1st company.

    Or split the credit card bill and record the first company’s portion in their QuickBooks file and the new company’s portion in the new QuickBooks file. Between the two companies, the total amount due should equal the total on the credit card statement.

    Hope that helps!

  • Lisa

    I’m trying to balance 3 business credit cards. The expenses have not been entered since October 2011. I want to enter everything from October to now, but when I do that a prompt comes up warning me about making changes when it’s been past 90 days. I’m not too sure how to make adjustments so things aren’t all messed up. I don’t have a lot of experience doing this on my own, but I’d rather get the credit cards balanced sooner than later.

  • Dawn

    Hi Lisa. Quickbooks defaults to 90 days in the past and 30 days in the future
    You can reset the dates in quickbooks by going to Edit – Preferences – Accounting – Company Preferences – Date warnings. Be cautious when making changes to the dates, especially if the year in question has already had a tax return prepared on the existing information. After reconciling the credit card I would suggest resetting the dates. Hope this helps.

  • Teho

    Dustin, thank you for your advice. This website is very informative and helpful.

  • Nancy

    With respect to entering credit cards I use Method #1. I recently had a situation where a credit card bill was paid by someone else. How would you enter this in Quickbooks so that the credit card can be reconciled properly?

  • Alicia

    I am trying to reconcile credit cards with statement dates beginning Dec. 27,2011 and ending Jan. 26, 2012. I did not enter any charges made to the card from December, since it was in 2011. So, now my numbers are way off and I cannot reconcile. Should I have added the December charges, so that it will add up when reconciled?

  • @Nancy – When you say the bill was paid by someone else, I’m assuming one of the company owners or managers sent a payment from their personal funds to pay off the credit card since the charges were for personal expenses? Three options:

    1. You don’t have to record the personal expenses in QuickBooks. When you reconcile, take the ending monthly balance and subtract out the personal expenses. That will leave you with the balance due for only the business expenses.

    2. If you feel better about recording every charge on the statement, you can post the personal charges to a receivable account (i.e. “Due from Owner”). Then record the other person’s payment with a journal entry:
    Debit – Credit Card Payable/Liability xxx
    Credit – Accounts Receivable (Due from Owner) xxx
    You can clear the journal entry on the reconciliation window when the payment from the individual shows up on the statement.

    3. If the expenses have already been recorded, you can do a journal entry to back them out:
    Debit – Credit Card Payable xxx
    Credit – Expense (where charge originally posted) xxx
    Then you can clear this journal entry in the reconciliation window when the payment from the other person appears on the statement.

    I hope that helps!

  • Hi Alicia,

    You are correct in not posting any of the 2011 charges since they were for last year. If the numbers are closed for 2011 and have been sent to your tax preparer, you don’t want to change the 2011 numbers. You can enter the 2011 charges on 1/1/12 (assuming the Jan numbers have not been finished).

  • Jumaane

    Man…this is great. I use method one, however, I have a different issue. I download all of my transactions using the download feature and code all of my transactions to the “other expense” amount until I am able to code the expense to the proper account. We have various people in the organization with credit cards so it is difficult to determine what job or expense account the credit card charges belongs. What is the best way to facilitate the recording of the credit card transactions to the proper account and ensure they were approved transactions. We currently have employees complete purchase request for each purchases or group of purchases. We also have employees complete a travel authorization request. Does anybody have any best practices in this area? Should we just have the employee complete a monthly Purchase Request for all of the credit card transactions at the end of the month hunting down each and every purchase request related to individual charges?

  • Jimmy

    Great article! Almost exactly what I was looking for.

    Prior to my recent arrival, CC charges were not tracked using either method #1 or #2 (a mess) – just one monthly bill and one lump sum payment from accounts payable/checking account.

    I started using Method #1 last month. We have one CC account with four different cardholders/numbers that gets paid in full each month. And I did learn when reconciling/paying that you have to breakdown the individual cardholder’s share of the payment on separate expense lines for each sub-account/cardholder or the balance on the “sub-cards” will continue to increase.

    However, after running some reports, I noticed several “unpaid” bills on customer accounts that were credit card charges – even though those charges had previously been reconciled and paid.

    In researching, I found that some suggest what seems to be an even more tedious method. Entering each CC charges as an A/P bill, then “paying” those bills using payment method: credit card, and the appropriate cardholder’s CC account. I would presume that would generate a CC charge, as if you were using Method #1, and you would perform the monthly reconciliation the same.

    Seems UBER-tedious, but sounds like it would keep things from showing up as “unpaid” on certain reports…. thoughts/opinions of doing it this way??

  • Leslie

    My question is really confusing….I started at this company over 2 years ago but was never really trained on quickbooks, as the person before me. Not sure what was done in the past but it seems like some of the bills were entered but some weren’t, Is there a way to start off fresh in the middle of the year but go back and input the information since January. I have only written checks in Banking, write checks. Most of our credit cards have no purchases just finance charges. What do you recommend

  • Bob


    I am a general contractor and we use credit cards for most all our materials we purchase. We are working on 10-12 projects at a time and are looking to assign each of these expenses on our CC to a specific job – sounds simple but can’t find a way to do this in QB’s. Each month we download our CC statement in QB’s and are hopefully looking for a way to add job specific information to each charge.

  • Bob, it is possible to assign credit card expenses to specific jobs. In the Enter Credit Card Charges screen, there is a column for Customer:Job. Your CPA may be able to explain the entire job costing process. For more tips, check out Nancy Smyth’s blog at http://blog.sunburstsoftwaresolutions.com. Her blog focuses on QuickBooks for Contractors.

  • Mike

    I have a simple question about a complex issue. We have about 8 credit card users that are very heavily used. We average about 1000 to 1200 transactions per month and sometimes more. I use method # 1 and I download credit card transactions using the web connect file but my assistant who is assigned to match those transactions to the respective expense account find it really tedious and she is constantly complaining. I have to do it when she’s on vacation and I find it to be also very hard job. Can you suggest an easier way to handle entering that many transactions into QB and keeping the books accurate and reflective of proper activities. Our CC usage is only increasing and I am really hoping for some solutions here.

  • Karen

    Here’s my question. I use method #1. I have a credit card account that I closed. After closing there was a credit on my account of $10.60, the credit card company sent me a check. I don’t know how to enter this in Quickbooks to make this account inactive and show that they paid me a $10.60 check. Thoughts? Thanks!

  • Pravin

    How can I avoid the entire process of entering credit card transaction made by my employees. Can they use their credit cards (company owned) and transactions get recorded whenever they make a purchase….all I want to do is go in & just classify them in the correct G/L a/c or allocate a specific job number, etc. Eg. If John (an employee) uses a Wells Fargo biz credit card (given to him by my company), the transaction to automatically appear in my QuickBooks (link my QB & the credit card)and I only go in & classify the trans to the correct G/L a/c.

  • Sandra B

    Hi Dustin,

    I came across your blog due to my new task – start paying any invoices that come in by mail with our firm credit card that we can which were previously paid all by checks. Problem is I just started at this job and was still getting the hang of the payment method of checks, I figured it cant be to hard to pay but want to record correctly.. could you give me some steps for a quickbooks dummy? :) Any help would be appreciated – I tried to set up the account but it said I had to link it to out bank account didn’t want to continue with that unless it was right!

    Thanks so much!

  • Rob T

    When does a merchant account become a credit card account? For example a gas card is typically issued by the vendor, so why should I set it up as a credit card instead of an account payable? When cash is tight I will carry a balance, when cash flow is good, I pay the monthly balance in full. I don’t want to spend the time to enter the details of each time I fill the tank and the vendor doesn’t have online download for easy entry into Quickbooks. If I were to add additional cards to the account, it would take even more time to enter the details of each transaction. I like the full details, but just don’t have the time to enter the transactions. Any suggestions?

  • Everyone,

    Thank you for the many comments and questions. I’m happy to see that this has become a very popular post.

    While I welcome the submission of questions on my blog, I am unable to answer them all. Many of the questions posted here require more than a five minute answer. You may want to try the Intuit Community or find a member of the QuickBooks ProAdvisor program in your area who can become familiar with your business and look at your QuickBooks file along with you.

  • Gen

    Hi Dustin,

    I have a fairly simple question. How do you record a credit balance refund? I use method #1. The problem arises from an overpayment to the credit card company, not an overpayment on any one expense transaction.


  • Gigi

    How exactly is the step by step way to do option #1 correctly?

  • Joanie

    Today I received a phone call from a prospective client. She posed a question in order to determine if she was interested in hiring me based on how would I handle payment of her personal credit card used for her business. She learned that is was okay to lend her personal credit card to her business. I would have handled as explained in # 1, recording all the credit card charges in the credit card feature on QB and writing a check that would pay the credit card on the expense tab. She then asked would this be a reimbursement to her or impact the owner’s draw?

  • Karen

    Help Re. Credit Card Account!

    Hi Dustin,

    My parent’s new bookkeeper used method 2 above instead of method 1 which I use in my business and feel is the only accurate way to go.

    She listed the credit card ie; VISA, DISCOVER as the “subaccount” of “Sam Expense”. Can we now adjust/shift these accounts to Credit Card accounts as in method 1? If not how do we get from here to method 1?

  • Alan

    For a cash-basis small business, method #1 doesn’t seem to be an option in putting together an income statement for tax purposes. For such a small business, I believe recording credit card transactions to expense should only occur when a credit card bill is paid. While this will inevitably result in differences between the total of the credit card transactions and the amount actually recorded as expense for tax purposes (both because of timing and because the bill may not be paid in full), I don’t see any other way to record such expenses for a cash-basis business. Do you?

  • Jacqe

    I need help I have a credit card for the company and when someone purchases something I record it in the credit card charge icon.. Then at the end of the month I pay the bill. and itemize the check to separate where the different charges are going to in the different accounts. But when I do that it comes up in my different account twice. The time I put it in the charge icon and then again from the check.

  • Phill

    I am very concerned: I use method 1 but I see people trying to stick out for using the bill and bill-payment features to enter and pay cc balances. My question is, if you create a bill after reconciling the cc account, the bill amount will go to AP. QB will still show the same CC balance as credit card liability on the balance sheet while the same amount is recorded in Accounts payable. Isn’t this double-reporting and overstating the current liability on the balance sheet?

    The second concern is (and this I personally experience): When you recon and enter the cc balance as a bill, if you make partial payments on that balance, this create a problem next time you’re about to reconcile. There is no way you can individually select each bill-payments in the recon window on the payment side – they just don’t show up. The only thing that shows up on that side is the total bill that you entered and selecting the bill amount will make it impossible to reconcile your account if you only make partial payments. I am surprise that a CPA advise her client to do it that way when it just not the best way to do it. The best way is NOT to generate a bill and then use “Write Checks” to make your payments – NOT Bill-payments. Bill payments ONLY work perfect for full payments. But I am still concerned about double-reporting in AP as well as CCard balances.

    I would appreciate someone’s take on this. correct me if I am wrong, thanks.

  • WM

    My client has credit cards payment with late fees and finance charges. I recorded the finance charges to “Interest Expense”. Where should I record the late fees? “Bank Charges”? “Credit Card Co”?


  • Introducing Method #3! (Hopefully - anyways!)

    Finally: A Method #3!

    Throughout last 2.5 decades (starting with Quicken + QuickPay), I have intentionally used the inefficient and time-consuming Method #2 and have itemized each and every transaction for every one of my credit cards and sub account holders. Regretfully, it has consumed an exorbitant amount of my life, bit I continously ran into dead ends using other techniques.

    Throughout this period, I have been unable to utilize WebConnect, the Online Banking Center or the statement downloads available from the card companies since I needed to assign each transaction to the proper CLASS. Also, many of my transactions need to be split between classes so it has always been easier to use Method #2 and to enter each line item manually with the help of quickfill. Note: I pay in full each month and acknowledge that Method #2 will not work for those who carry balances.

    American Express is my biggest nightmare and a statement with 700-1000 line items is normal. What I do is pay AE online seven times within each month, one payment corresponding to the total purchase of each of my seven sub-account holders. Sometimes, some or all of these payments will be made on the same day, depending on cash flow.

    When I do an online reconciliation with the bank, my system downloads each of the seven individual American Express payments which I then simply categorize as MISC, temporarily. [(*) I will refer back to this later!]

    Later, when I have lots of time, I go back and break down each of the MISC expenses to match the sub card holder’s exact breakdown as listed on the credit card statement. I assign each a class at that time and do whatever splits are needed. Even with the quickfill, is truly a pain and huge time suck… but it sounds like you all already knew that.

    FINALLY, it sounds like they have introduced a batch import option to the Accountant’s Version of QuickBooks 2013. It allows users to bulk import from Excel and now supports classes. American Express offers a downloadable report in CSV format from their website which imports into QB2013 Accountant’s Edition. Here is an article which I am looking forward to trying as a solution and I thought some of you might be able to benefit too. Allow me to refer to this new technique as METHOD #3.


    Does anyone have experience with this newly available Method #3? Remember how, a few paragraphs earlier, I labeled with a “*” and said I will refer to it later? Well, if I go and batch import all AE transactions from April to October (there will be thousands of line items), any suggestions as to what I should then do with the bank transactions I downloaded earlier during past online banking session and, at the time, classified as MISC? Erase them right? Otherwise, the credit card money will be debited twice, right?

    Won’t that cause serious problems with my bank reconciliations? Sure it will! Must I then journal entry each of the 7 monthly sub-account expenses? Ugh! If so, I might stick with Method #2 for another 25 years.

    I’m stuck. Any suggestions would be appreciated. Would love to get off the Method #2 boat.

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