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QuickBooks Tip: How to Reconcile Canceled Credit Card Payments

by Ruth Perryman 14. June 2009 14:12

Question: I'm reconciling our bank account/statement. A client made a payment by credit card, then canceled it. Our April bank statement reflects a deposit from the merchant account. Our May statement currently shows the debit/withdrawal from the merchant. How do I correctly record this in QuickBooks? Do I debit our bank account? Do I make a general journal adjustment?
Thanks for your help.

Answer:
First, you should create an item for bounced checks, canceled credit card payments, etc.

   1.   Go to the Lists menu and click Item List.
   2.   Click Items at the bottom of the list and then click New.
   3.   Create an Other Charge item titled something like "Returned payment"
           -In the Amount field, leave a zero amount.
           -From the Tax Code list, choose Non.
           -In the Account field, choose your bank account (for example, Checking).
   4.   Click Next.

If you want to charge them a service charge for bank fees, etc. create another item:

   5.   Create a second Other Charge item titled something like "Service charges"
           -In the Amount field, leave a zero amount
           -From the Tax Code list, choose Non.
           -You have two options for Account. If you are merely passing on your bank charges, you may want to use your bank fee expense account (this will reduce your bank fee expenses). If you are charging more than what your bank charged you, you should probably create a revenue account called something like Service Charges instead.
   6.   Click OK.

Then use these items to re-invoice the customer:

   7.   Go to Customers > Create Invoice
   8.   For the first line item on the invoice, use the returned payment item for the amount of the amount of the reversed payment. Because this item is linked to your bank account, this will reduce your bank account by the amount of the bounced check, thereby backing out the original transaction on your books. The income for the original sale will be recorded when you receive the new customer payment.
   9.   For the second line item on the invoice, use the Bad Check Charge item for the amount of any bank fees that you want to recover.

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Ruth Perryman - QuickBooks Specialist Written by Ruth Perryman, CMA, CFE, CFM, MBA, DPA (ABD)

Ruth is the president of The QB Specialists, an Intuit Solutions Provider that has helped thousands of businesses throughout the United States, Canada and even the Caribbean get the most out of QuickBooks since 1996. Ruth has over 20 years of industry experience, including 5 years as a Chief Financial Officer. She is an Advanced Certified QuickBooks ProAdvisor and a member of Intuit’s Trainer/Writer Network. She is also certified in QuickBooks Point of Sale and Enterprise.

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