How do credit card transactions work?
To setup a CC account:
Add new AP Vendor for the CC
Add new GL account for the CC
Add new credit card in Cash Management
- Enter bills to the specific vendors in AP
- Use the 'Bills to Pay' function in AP to pay these bills with the Credit Card
- Note the AP Ledger and the the AP Aging are the same (nothing owing), and the GL will reflect these new credit card charges and there will be a liability in the GL credit card account. (the liability is transferred from AP trade account to the Credit Card account in GL)
- Use Charge Payoffs in Cash Management to clear these new transactions from the GL balance and transfer the liability back to the AP. GL balance in the credit card account is now zero and AP Ledger and AP Aging show the correct (same) balance owing to the Credit Card vendor.
- Paying off the Credit Card - two methods: 1) Select Bills to pay and pay by check from another bank. This is the simplest method and is the same as paying any other vendor account. GL balance for the cc account is still zero and AP Ledger and AP Aging are correct and equal. 2) Using Funds Transfer in Cash Management. After FT is done, the GL balance will be a debit amount (of the FT) and the AP Ledger will show the correct balance, the AP Aging will not change. This is when the AP Ledger and the AP Aging will not be equal. The correct balance of the CC is the AP Ledger balance which will equal the combined total of the GL CC account and AP Aging. Next, you need to do another Charge Payoff to select the FT amount plus other charges (as a charge payoffs cannot be a negative value). Once all the charges and the FT are processed through the Charge Payoffs, the GL balance for the CC account will be zero and the AP Aging & Ledger will once again be the same.
See attached file for examples of journal entries created.