Available for: Accounting Basic, Accounting Premium
This article explains how to record business credit card purchases and credit card payments in Patriot Accounting, and how each type of credit card transaction affects the credit card liability account on the balance sheet. Use this article when paying vendors with a business credit card, paying down a credit card balance from a checking account, or posting imported credit card transactions.
How Credit Card Transactions Affect the Credit Card Liability Account
A business credit card in Patriot Accounting is tracked in a credit card liability account. The credit card liability account shows how much the business owes the credit card company.
Two types of credit card transactions affect the credit card liability account, and the two types post in opposite directions:
Credit card purchase: Paying a vendor or a vendor bill with a credit card. A credit card purchase credits the credit card liability account and increases the balance owed.
Credit card payment: Paying the credit card company, for example from a checking account. A credit card payment debits the credit card liability account and reduces the balance owed.
Paying a vendor bill with a credit card is a credit card purchase, not a credit card payment. Paying a vendor bill with a credit card moves the amount owed from the vendor to the credit card company, so the credit card balance goes up.
Example: Credit Card Purchase and Credit Card Payment
A business has a $2,000 balance on its credit card, buys $500 of office supplies with the credit card, and then pays $1,200 to the credit card company from checking. The ending credit card balance is $1,300 ($2,000 + $500 − $1,200).
Transaction | Debit | Credit | Credit card balance |
Starting balance | $2,000 | ||
$500 office supplies paid with the credit card | Office Supplies Expense $500 | Credit Card $500 | $2,500 |
$1,200 payment to the credit card company from checking | Credit Card $1,200 | Checking $1,200 | $1,300 |
Record a Credit Card Purchase Without Entering a Bill First
Use Enter & Pay Bills to record a credit card purchase in one step when there is no unpaid vendor bill to track. Enter & Pay Bills debits the expense account and credits the credit card liability account.
Go to Accounting > Payables > Enter & Pay Bills.
In Payment Type, select Credit Card.
In Withdrawal Account, select the credit card account.
Enter the Payment Date.
Select the Vendor.
In Expense Assignment, select the expense account for the purchase.
Enter the Amount.
Click Save and Continue, then click Approve Payments.
Pay a Vendor Bill With a Credit Card
Use Enter Bills and then Pay Bills when a vendor bill is entered now and paid later with a credit card. Paying a vendor bill with a credit card records two entries:
Entering the vendor bill (Accounting > Payables > Enter Bills) with the vendor bill posted to an expense account: debit the expense account, credit Accounts Payable.
Paying the vendor bill (Accounting > Payables > Pay Bills) with Payment Type set to Credit Card and the credit card account selected as the Withdrawal Account: debit Accounts Payable, credit the credit card liability account.
After the vendor bill payment is approved, the vendor bill is marked as paid, the expense is recorded, and the credit card balance increases by the amount of the vendor bill.
Important: Post the vendor bill to an expense account, not to the credit card liability account. Posting a vendor bill to the credit card liability account causes the vendor bill to debit the credit card account and the credit card payment to credit the credit card account. The credit card balance then nets to zero, and the expense is never recorded.
Record a Payment to the Credit Card Company From Checking
A payment to the credit card company reduces the credit card balance. To record a payment to the credit card company from a checking account, enter a withdrawal from checking posted to the credit card liability account:
Go to Accounting > Financial Tasks > Deposit/Withdrawal.
Select Withdrawal.
Select the checking account as the bank account.
In the Account field, select the credit card liability account.
Enter the payment amount and date.
Click Save.
The withdrawal debits the credit card liability account and credits the checking account.
Note: A payment to the credit card company entered through Pay Bills debits Accounts Payable, not the credit card liability account. A Pay Bills payment only reduces the credit card balance if the vendor bill to the credit card company was posted to the credit card liability account. Record Past Payments supports only check and cash payment types, so Record Past Payments cannot be used to record a credit card purchase.
Post Imported Credit Card and Bank Transactions
When a credit card account or checking account is connected to Patriot Accounting, imported transactions appear on the Manage Imported Transactions page (Accounting > Financial Tasks > Manage Imported Transactions). The connected credit card account or checking account is one side of each journal entry, and the Post to Account field is the offsetting side.
Imported credit card purchase (from the connected credit card account): In Post to Account, select the expense account for the purchase. The journal entry debits the expense account and credits the credit card liability account.
Imported payment to the credit card company (from the connected checking account): In Post to Account, select the credit card liability account. The journal entry debits the credit card liability account and credits the checking account.
Avoid Duplicate Credit Card Transactions
A payment to the credit card company often appears twice when both the checking account and the credit card account are connected: once as a withdrawal from checking and once as a payment on the credit card account. Post the payment to the credit card company once and dismiss the second imported transaction.
A credit card purchase can also be recorded twice if the credit card purchase was already entered through Enter & Pay Bills or Pay Bills and is then imported from the connected credit card account. Dismiss the imported credit card transaction, or use Mark unpaid bills and invoices as paid on the Manage Imported Transactions page when an unpaid vendor bill matches the imported transaction total.
Check the Credit Card Balance in the General Ledger
To confirm that credit card purchases and credit card payments posted to the credit card liability account, go to Reports > Accounting > Financial Reports > General Ledger and review the credit card account. Credit card purchases appear as credits, and credit card payments appear as debits.
If a credit card purchase paid through Pay Bills does not appear in the credit card account, check that:
The vendor bill payment was approved and appears in the Vendor Payment History.
The credit card account was selected as the Withdrawal Account on the vendor bill payment.
The vendor bill was posted to an expense account, not to the credit card liability account.