Credit Cards Accepted from Clients

by Gayle

Recording Credit Card Transactions

Recording Credit Card Transactions

Would you please explain the process as to how credit cards accepted from a client would work between you and the card company?

1.Does each transaction at the time of purchase go directly to the card company?

2. Does the bank or card company at the end of each day tally up all the sales less their fee for the use of the card?

3. Does the card company electronically deposit that amount into your business bank account?

4. What source documents would you receive to support this deposit?

I am not clear what bookkeeping entries would be required to complete this type of transaction.

Would you make a bookkeeping entry for the sale to the customer and then another entry for the use of the credit card?

Thank you.

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Hi Gayle,

When doing bookkeeping, it is important to think your way through a transaction ... or series of transactions ... on paper using T accounts if necessary.

When it is a series of transaction, break it down into each step and book accordingly. Keep all your source documents to support the transaction, just like you would any other transaction.

For example: Step one would be to record the sale to your customer. In QuickBooks® you would use "Invoices" to setup your Accounts Receivable.

Step two would be to record the payment by the customer. In QuickBooks® you would use the "Receive Payment" function.

If the customer is paying by cash or cash equivalent at the time of the sale, you would record a "Sales Receipt" transaction in QuickBooks®. In this case, the sale and the payment are recorded in one step.

Tip: Anytime you don't know what journal entry QuickBooks® is booking "behind the scenes" when you enter data on one of their forms, the CTRL + Y shortcut key reports the transaction in the familiar debit and credit format.

The paperwork you receive from a credit card company depends on which company you are using and how the transaction takes place ... for example online PayPal reporting is different than merchant POS reporting.

How you book transactions also depends on volume. If you use POS, your system gives a daily report ... in which case you would book daily sales as opposed to individual sales.

Credit card processing fees are similar to any banking service fee, so book accordingly.

I've posted this question under Unanswered Questions in the event that a visitor wants to respond with how their merchant account works.

In closing, I'd like to suggest you set aside 10-15 minutes a day enjoying a cup of tea and relaxing while you snoop and poke about this site to mine the tidbits of information it contains.

P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.

QuickBooks® is a registered trademark of Intuit Inc.

Comments for Credit Cards Accepted from Clients

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Using a Cash Register
by: Lake

The IRS has an excellent section on the procdures they expect to see in place in a business that uses a cash register.

Go to the IRS site and type in the search box "audit techniques cash business" to find the article titled "Cash Intensive Businesses Audit Techniques Guide"

This article is recommended reading for all bookkeepers. It also discusses methods individuals may use to misappropriate cash from a business and what an auditor looks for to determine if a business is operting in the underground economy.

Great reading!

Amex and TD Merchant Services
by: The Happy Bookkeeper

Hi Gayla!

I have two different merchant accounts, one with Amex Merchant Services, and one with TD Merchant Services.

Payments that I receive paid by Amex are deposited to my bank account 'less' the fees. That is, if my client pays $100, and the Amex fee is $4, then $96 is deposited into my bank account.

So on my bookkeeping software, I apply the client payment of $100, and deposit it to the bank. Then I enter an expense directly paid from the bank from Amex for $4, and my bank balances nicely. Though, generally there is more than one payment, so I do not enter the amex charges individually, I get the monthly total from the Amex Merchant Services statement. A bit of math needs to be done because my bank statement period and my Amex statement period don't match, so I break it into two expense entries to match my bank statement period; my bank statement goes from the 6th to the 5th, so I'd enter "Amex fees Jan 1st to 5th" and "Amex fees Jan 6th to 31st".

Note, there is no GST/HST on credit card transaction fees! But there may be a small GST/HST charge on a monthly fee or POS device rental.

For my TD Merchant Account, it is so much nicer! The full client payment is deposited, and the transaction fees go through the bank once a month, and these I simply enter as an expense, paid directly from the bank. Again, don't back out GST/HST! But check the TD Merchant statement to see if there is a small GST/HST amount on the monthly fee.

Any Merchant Account you use should have an account statement, and if one is not mailed to you, you should be able to access it online. Give your merchant account provider a call, and they'll let you know how to access it.

Have a Happy Day!
The Happy Bookkeeper

Credit Card Payments
by: Kyle (Ontario)

I think I would record a sale that is paid with a credit card the same way it would be if it were a cheque. Debit Undeposited Funds, credit Sales. When the credit card company actually deposits the money in our bank account, the entry would be debit Bank (less any fees), debit Bank Charges or Credit Card Charges (expense) and credit Undeposited Funds.

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