This tutorial will teach you how to reconcile your credit card in QuickBooks Online. Reconciling your credit cards is a crucial step in good bookkeeping to ensure that the credit card activity in QuickBooks matches the activity on your credit card statement. But don’t worry: this tutorial shows how QuickBooks makes credit card reconciliation easy.
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This tutorial is one in our series of Free QuickBooks Tutorials. You can either watch the video below, read through the step-by-step instructions, or do both.
The Credit Card Reconciliation Process
Credit card accounts are reconciled by inputting your ending statement balance and then matching the transactions in QuickBooks to the transactions on your statement. Once all the transactions shown on your statement are marked as “cleared” in QuickBooks, the QuickBooks cleared balance will match the statement balance, and the account is reconciled.
The reconciliation process can find errors in several ways:
- Find missing transactions: If transactions on your statement have not been entered in QuickBooks, you will have to do so before the account will reconcile.
- Identify incorrect amounts: If the same transaction has different amounts in QuickBooks vs the bank statement, the account will not reconcile.
- Locate duplicate transactions: By reviewing transactions for the month that did not appear on your bank statement, you can identify transactions that should not be in QuickBooks.
- Find erroneous or fraudulent charges: Any charges on your bank statement that are not in QuickBooks should be examined to determine whether they are legitimate charges before being entered into QuickBooks.
How to Reconcile a Credit Card in QuickBooks
A credit card reconciliation in QuickBooks can be done in five easy steps:
- Select Accounting then Reconcile from the left menu.
- Select the account to reconcile from the drop-down box and enter your statement information.
- Match credit card transactions.
- Confirm $0.00 difference.
- Make a payment or create a bill (optional).
1. Navigate to the QuickBooks Credit Card Reconciliation Screen
Hover your cursor over Accounting in the left menu bar and then select Reconcile:
2. Select the Account and Enter Your Statement Information
Let’s use the following short credit card statement to illustrate the credit card account reconciliation process:
Local Credit Card
Statement for the Month Ending
Oct. 1, 2020
Oct. 1, 2020
Auto. Insurance Co.
Oct. 10, 2020
Oct. 13, 2020
Oct. 25, 2020
Business Supply Center
Oct. 31, 2020
Oct. 31, 2020
After completing step one above, you should be viewing the following reconciliation screen:
A. Account: Select the credit card account that you are reconciling.
B. Last statement ending date: QuickBooks indicates the date of the last statement reconciled for this credit card account. This date will be missing if this is the first reconciliation for this credit card.
Don’t skip months: A reconciliation always starts with the reconciled balance from the prior month, so you can’t skip months. If it’s been several months since a reconciliation, you need to go all the way back to the last reconciled statement and work forward one month at a time.
C. Beginning balance: QuickBooks shows the ending balance of the prior statement reconciled, which also must be the beginning balance of the current statement. This amount will be zero if this is the first time this credit card has been reconciled.
Verify beginning balance: For your reconciliation to work, the beginning balance calculated by QuickBooks must match the ending balance on the last statement reconciled. This amount could be off if transactions in QuickBooks that were reconciled previously have been changed. If the beginning balance is different, QuickBooks will provide a link to help you identify the transaction that changed.
D. Ending balance: Input the ending balance from your credit card statement.
E. Finance charge: If you haven’t already done so in a separate transaction, input the finance charge (if any) from your credit card statement. Indicate the date the charge was assessed and the expense account, or category, to track the expense. QuickBooks will record this expense automatically when the reconciliation is complete.
After entering all your statement information, click the green Start reconciling button.
3. Match Credit Card Transactions
After completing step two, QuickBooks displays a screen with a summary of the reconciliation in the top half and detailed transactions in the bottom half:
A. Statement ending balance: The statement balance carries over from your input in the prior screen and should match the ending balance on your credit card statement.
B. Cleared balance: QuickBooks calculates the cleared balance as the beginning balance from the prior screen, plus charges you mark as cleared, minus payments you mark as cleared.
C. Difference: The difference between the statement ending balance and cleared balance must be zero before you can finalize a reconciliation.
D. Cleared transaction: Click the radial button in the right-most column for each transaction if that transaction appears on your credit card statement. After you click the radial button, the transaction will be included in the cleared balance (item B).
Matching transactions between QuickBooks and your statement consists of tracing transactions from QuickBooks to your statement and then investigating unmarked transactions on your statement.
Trace Transactions From QuickBooks to Your Statement
Start by looking at each transaction listed in the QuickBooks screen above and finding it on your credit card statement. If you find it, click the radial button for the transaction (item D) and place a checkmark next to the transaction on your statement.
You need to investigate any transaction in QuickBooks that is not on your bank statement. While the most likely cause is an error in your QuickBooks accounting, don’t just delete the transaction because it may affect other accounts or periods as well. Here are some of the most common errors that will cause errant QuickBooks credit card transactions to appear:
- Duplicate transactions: You may have inadvertently created a duplicate transaction and, while the original transaction will be shown on the statement, the duplicate will not. For instance, if the credit card activity is imported from the bank, you may have added a transaction as new instead of matching it to an existing transaction. If so, you should delete the duplicate transaction.
- Wrong account: The suspect transaction may have been a charge on a different credit card and incorrectly recorded on this account. If so, edit the transaction and assign it to the payment account.
- Wrong date: The transaction may have the wrong date entered in QuickBooks. If the correct date is after the statement end date, then the transaction will not be shown on this statement. There might be nothing wrong if the transaction occurred at the very end of the period, but if the date is wrong, edit the transaction to correct it.
Investigate Unmarked Transactions on Your Statement
When tracing from QuickBooks to your statement, you placed a mark next to each transaction on your statement that was shown in QuickBooks. Now, look for any transactions on your statement that do not have a mark. If unmarked transactions are legitimate, they need to be added to QuickBooks. Once added, be sure to mark the transaction as cleared by clicking the radial button in the right-most column.
Open a second QuickBooks tab: You can have multiple QuickBooks tabs open at the same time. Right-click on the tab in your internet browser and select “duplicate” to open a second tab. You can navigate as normal in the second tab to make necessary changes. Once the changes are saved, you’ll need to refresh the original tab for the changes to appear.
4. Confirm the Difference Is Zero
Once all the selected transactions in QuickBooks match the transactions on your credit card statement, the difference between your statement ending balance and cleared balance should be zero (item C). Sometimes, finding errors can be frustrating, but simple math guarantees that if your beginning balances match, and all your transactions match, then your ending balance has to match.
Here is our sample reconciliation with all of the transactions matched to our sample statement:
When your reconciliation is complete, click the green Finish now button in the upper-right corner of the screen.
5. Make a Payment on the Credit Card Balance (Optional)
QuickBooks will give a message that the reconciliation is complete and ask if you want to make a payment towards this credit card balance:
As with vendor invoices in QuickBooks Online, your credit card bill can either be paid now or entered as a bill to be paid later.
A. Click on Pay all or a portion of the bill now to go to the Write Check screen where you can create a check for whatever portion of the credit card balance you wish to pay. The Category should default to the credit card account you just reconciled, and you shouldn’t change it.
B. Click on Enter a bill to pay later to go to the Create Bill screen where you can enter a bill for the portion of the balance you wish to pay by the due date shown on the credit card statement. Make sure the Category is the credit card you just reconciled, the bill date is the statement date and the due date agrees with the due date on the credit card statement.
Why enter a bill? Entering a bill moves a portion of your credit card liability to a current accounts payable (A/P). The advantage is that your credit card payment and due date, now appear with your other A/P so that you have a reminder to pay the bill before it becomes overdue.
You don’t have to enter a payment or create a bill now. You can write a check or enter a bill later by going directly to the Write Check or Create Bill screens. Whichever you choose, make sure the Category is the credit card account you are paying.
When you are finished setting up your payment or have decided to wait until later, click the green Done button.
Congratulations on finishing another tutorial and learning how to reconcile your credit card account. The next tutorial in our QuickBooks Online Training Course is How to Manage Credit Card Sales with QuickBooks Payments. In that tutorial, you will learn how to accept credit card payments with the QuickBooks Payments service from Intuit.