Reconciling your bank accounts monthly in QuickBooks is a must, but did you know that you should reconcile your credit card accounts monthly too? Doing so will ensure that common errors, such as misposted or forgotten charges, are corrected in your company’s file as the year progresses. No one enjoys the daunting task of cleaning up 12 months’ worth of transactions at the end of the year – except maybe your accountant!
As with bank reconciliations, the credit card reconciliation feature is accessed by going to the “Banking” drop-down menu at the top of your screen and selecting the “Reconcile” option. And, as with the bank register, your credit card accounts also have registers available where all charges and payments can be entered.
Unless you pay your company card in full each month, entering credit card charges on the date incurred is important. Here’s why: taxpayers are entitled to a deduction for business expenses when charged to their cards. If you make a large purchase at Office Depot on December 28th while out for your after-Christmas shopping spree, you are permitted to deduct the expense on your 2012 tax return, even if you don’t pay the bill until January 2013. If you’re always waiting to record your credit card charges until you pay your bill, you’re inadvertently missing out on significant deductions.
The correct way to account for spending on your company card is to use the credit card register or the “enter credit card charges” option under the “Banking” pull down menu. Purchases you make throughout the month will be reflected on your company’s profit and loss statement as your credit card liability balance grows. Then, in the next month, as you start to pay down your outstanding balance, your American Express payment, for example, will be posted to the credit card liability account, reducing the balance QuickBooks shows for your card (as well as your bank account for that check you just wrote!).
Many business owners run a significant portion of their monthly business expenses through company credit cards. Those cash back offers and frequent flier miles are just too good to resist. Follow these simple steps to reconcile your charges monthly, and you’ll be able to enjoy all the perks of being a platinum card holder without the headache of a major year-end clean-up.
Contact Kaufman, Rossin’s QuickBooks ProAdvisors to learn how you can better use QuickBooks for your business needs.
Meredith Tucker is an accounting services manager at Kaufman, Rossin’s Ft. Lauderdale office, and a QuickBooks ProAdvisor. Kaufman, Rossin & Co., one of the top CPA firms in the country, offers QuickBooks training and consulting services. She can be reached at firstname.lastname@example.org.