Before recording credit card transactions, we should know, what is credit card? Credit card is a plastic card which is used for getting loan quickly for buying any product. So, payment through credit card is just taken loan. If you make budget, you can easily fix the limit of credit card transaction. You can track the cost of credit card through your accounting records. Following are the steps for recording credit card transactions.
1st Step : Basic Credit Card Record
Basic credit card record means to record all credit card transactions in journal entry form. For example, we buy a product of $ 100 through our credit card, following transaction will be pass:
a) When you get loan through credit card.
Bank Account Dr. $ 100
Credit Card Payable Account Dr. $ 100
b) For buying goods through credit card.
Purchase Account Dr. $ 100
Bank Account Cr. $ 100
{ If you buy the product through credit card}
c) For paying the amount of credit card + Interest + other Charges after getting its bill in next week.
Credit Card Payable Account Dr. $ 100
Interest + other Charges Account Dr. $ 10
Bank Account Cr. $ 110
2nd Step : Which Date is used to record a credit card transaction
In recording of credit card transaction, you should remember the date to record a credit card transaction. When we use the credit card for buying the product. That date, credit card liability will start. In above case a) and b) transaction date will be same.
3rd Step : Reconcile Credit Card Statement
In India, you have to pay Rs. 250 per day penalty for delay the repayment of credit card loan and its interest. It means when you get credit card statement at the end of month, it will be different what you account is showing the liability of credit card. You should reconcile credit card statement like reconciling the bank statement. If any amount is not matched with your made accounts, you should check unauthorized charges. After this, you should contact with credit card company removing this. Sometime, rates of interest may increase. So, you have to check this also.
1st Step : Basic Credit Card Record
Basic credit card record means to record all credit card transactions in journal entry form. For example, we buy a product of $ 100 through our credit card, following transaction will be pass:
a) When you get loan through credit card.
Bank Account Dr. $ 100
Credit Card Payable Account Dr. $ 100
b) For buying goods through credit card.
Purchase Account Dr. $ 100
Bank Account Cr. $ 100
{ If you buy the product through credit card}
c) For paying the amount of credit card + Interest + other Charges after getting its bill in next week.
Credit Card Payable Account Dr. $ 100
Interest + other Charges Account Dr. $ 10
Bank Account Cr. $ 110
2nd Step : Which Date is used to record a credit card transaction
In recording of credit card transaction, you should remember the date to record a credit card transaction. When we use the credit card for buying the product. That date, credit card liability will start. In above case a) and b) transaction date will be same.
3rd Step : Reconcile Credit Card Statement
In India, you have to pay Rs. 250 per day penalty for delay the repayment of credit card loan and its interest. It means when you get credit card statement at the end of month, it will be different what you account is showing the liability of credit card. You should reconcile credit card statement like reconciling the bank statement. If any amount is not matched with your made accounts, you should check unauthorized charges. After this, you should contact with credit card company removing this. Sometime, rates of interest may increase. So, you have to check this also.
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