Managing Credit Card Balances in Softbase Evolution

Overview:

When your company has large credit card balances, such as owing $100,000 to American Express (AMEX), it’s essential to manage and reflect these balances accurately in the General Ledger (GL). This help article outlines how to properly record credit card balances, payments made using Accounts Payable (AP) checks, and how to handle additional charges to the credit card account.

1. Recording the Initial Credit Card Balance:

When you first recognize a large balance owed on a credit card, such as $100,000 to AMEX, this balance should be recorded as a liability on the GL.

Steps:

• Set Up a Liability Account: Create an account called “Credit Card Payable – American Express” in the GL.

• Record the Balance as an Invoice: Enter the total balance as an AP invoice under the AMEX vendor.

  Journal Entry:

  • Debit: Expense Accounts (e.g., Office Supplies, Travel) for the total amount of the charges.
  • Credit: Credit Card Payable – American Express (2100) for $100,000.

This entry records the liability and ensures the associated expenses are categorized correctly.

2. Making Payments Using AP Checks:

When payments are made to reduce the credit card balance, these payments should be recorded in the AP system as payments to the AMEX vendor.

Steps:

• Pay Down the Balance: Record the payment using an AP check.

  Journal Entry:

  • Debit: Credit Card Payable – American Express (2100) for the payment amount (e.g., $10,000).
  • Credit: Cash/Bank Account (1000) for the payment amount.

This reduces the liability and reflects the payment in your cash or bank account.

3. Recording Additional Charges:

If new charges are made to the AMEX account after the initial balance has been recorded, these should be entered as new invoices in the AP module.

Steps:

• Record New Charges: Enter the new charges as an additional AP invoice.

  Journal Entry:

  • Debit: Relevant Expense Accounts (e.g., Travel, Office Supplies) for the new charges (e.g., $5,000).
  • Credit: Credit Card Payable – American Express (2100) for the total of the new charges.

This increases the liability to reflect the new charges while categorizing the expenses.

4. Paying Down the Additional Balance:

When paying off the new charges, follow the same process as with the initial balance.

Steps:

• Record the Payment: Enter the payment in the AP system using an AP check.

  Journal Entry:

  • Debit: Credit Card Payable – American Express (2100) for the payment amount.
  • Credit: Cash/Bank Account (1000) for the payment amount.

5. Handling Interest and Fees:

If there are any interest or fees related to the credit card charges, these should be recorded as additional expenses.

Journal Entry for Interest:

• Debit: Interest Expense (6000) for the interest amount.
• Credit: Credit Card Payable – American Express (2100) for the interest amount.

6. Monthly Reconciliation:

Ensure that the Credit Card Payable account is reconciled monthly against the AMEX statement. This will help identify any discrepancies, unrecorded charges, or missing payments, ensuring that the GL balance is accurate and up to date.