Credit balance refund

4heather · ‎February 23, 2024

I have a rarely-used credit card account that I'm just now reconciling since it wasn't used for the last eight months and I sort of forgot about it. Back in October, the credit card company mailed us a check to reimburse us for a credit balance on the account, but that check never arrived, so the opening balance on the October statement is $-726.36, and the ending statement balance for October is $0.00, but no check was received to record against the credit balance to bring the account balance in QB up to zero. The balance on the credit card statements then remained zero on the November and December and January statements (again, rarely used), and in February they put a stop payment on the first refund check and mailed us a replacement, which was received.

To reconcile the credit card account in QB, I have to bring the credit card account up to zero, reduce our Materials Purchases account by the same amount, and the check will be deposited to the operating account in February, but there's no deposit to match it in the operating account back in October before the statement end date. I was tempted to do just one reconciliation for the entire period of October through February since that refund and one small purchase in February are the only two transactions on this account across that entire span of time, but we also have the end of the fiscal year that landed squarely in the middle of that, and I wasn't sure what that might do to our expense-tracking for the year, for tax purposes.

I could record the credit against our Materials account in QB to bring the balance up to zero back in October, but from what account do I accept the check in the deposit window in February? If I record it from our Materials account, that'll be reduced twice, (once each year in 2023 and 2024) and underreported on our P&L, and if I record it against the credit card account, QB will have record of two different $726.36 credits, one in October and one in February, which will throw off the beginning statement balance within QB. I thought about a journal entry to make corrections, but I'm not sure which account(s) to use.

I also suspect that I'm overthinking this and a bit lost in the weeds right now. Any ideas?

Aldren18 · ‎February 23, 2024

I appreciate you for sharing a detailed explanation of your concern, 4heather. It helps me provide accurate steps to address this.

It's my pleasure to assist you with your concern about reconciling the credit card account in QuickBooks. Let me provide some insights on how to fix it.

To effectively handle this situation, the recommended approach would be to create a dummy or clearing account and deposit the exact amount of 726.36 into it. Next, you can make a check and record it as an expense to the dummy account to zero out the deposit. Finally, perform a special reconciliation to verify that all transactions have been accounted for accurately.

First, follow these steps to set up a clearing account:

From the Lists menu, select Chart of Accounts.
Right-click anywhere in the Chart of Accounts, then select New.
In the Add New Account window, select the Bank radio button.
Select Continue.
Enter Clearing Account, Barter Account, or Wash Account in the Account Name field.
Do not enter an opening balance.
Click Save & Close.

Next, add a deposit and set the clearing account as the sender. Here's how:

Go to Banking and then click Make Deposits.
In the Make Deposits window, choose the clearing account under Receive From.
Then, input the amount of 726.36.

Then, create a check and link the clearing account to offset the deposited amount. I'll show you how:

Go to Banking and then select Write Checks.
In the Account category, put the clearing account.
Input the amount of 726.36
Select Save & Close.

After that, you can perform a special reconciliation to identify and correct any errors or discrepancies that may have occurred.

As for creating a journal entry, it is best to consult an accountant to ensure the affecting accounts are accurate.

I'm also adding an article that will help you customize reports you generate in QuickBooks Desktop for future use: Customize reports in QuickBooks Desktop.

Please keep me posted if you need additional assistance in performing the process. I want to ensure this gets resolved. Take care!

Rainflurry · ‎February 24, 2024

@4heather

It's easy to overthink these things. All you need to do is to record the deposit and assign it to the cc liability account. That will zero out the cc liability account. The Materials account has nothing to do with it. The Materials account was only impacted when there were cc charges or credits that posted to that account. At this point, the cc refund is just a transfer of funds from what the cc company owes you (the negative liability) to your bank account. Since the deposit (increase in your bank account) and the increase of the cc liability (to zero it out) are both balance sheet accounts, you can record the deposit as of the date received in February.

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