This article explains how to track credit card purchases, reconcile your credit card statement, record finance charges, and enter credit card payments.

Credit Cards as Contra Assets

The balance owed on a credit card can be treated either as a liability or a negative asset, known as a “contra” asset. Whether you make payments over time or pay the balance in full each month there are several advantages to using the contra asset approach.

  • Track expenses by vendor: Know how much you spent at each store (each vendor).
  • Reconcile your credit card statement: Check off items recorded in the computer against those on your statement.
  • No journal entries: Itemize purchases and record finance charges without a journal entry.Contra Assets Carry Negative Balances
    The term “contra” means it works in a way opposite to a traditional asset. So, rather than having a positive balance, like a bank account, a contra asset carries a negative balance. If you owed a hundred dollars it would appear as -100.

Set Up Credit Cards

In the Chart of Accounts:

  1. Create Asset accounts for each credit card you use.
  2. Add an Expense account for credit card interest & fees.
  3. Add each credit card to your list of Bank Accounts making sure to mark the Checkbook column.
  4. Enter Beginning Balances for each credit card as a negative amount.
  5. Create a Journal where credit card fees & interest will be recorded during reconciliation.

New Purchases, Reconciliation, Payments and Reports

Purchases Charged to Your Card When you make a purchase with your card enter it like a Vendor Check, as though you were paying the vendor, but be sure to select your contra asset as the Checkbook.

  1. For each new purchase enter the amount with the appropriate GL Account number, for example 5000.00 School Supplies. It may take several lines if you’ve purchased items that fall into different categories.
  2. Cash Advance: If your new items included a Cash Advance you’d probably want to show this as an increase to your Petty Cash Asset Account – be sure to keep all your receipts for the cash you spent. If you spent all the cash already then just enter the appropriate GL Account numbers for the expenses.
  3. Other Assets: If your new items include any Depreciable Assets (like office equipment, furniture, computers, etc.) be sure to increase the appropriate asset (like 1100.00 Office Equipment) don’t count it as an expense. Ask your accountant for details.

Optional: If you prefer not to track purchases by individual vendor you could create a New Vendor called something like “Visa – Purchases” and record all purchases to that one vendor.

Credit Card Statement
When you receive your credit card statement use the Bank Reconciliation feature to mark the items that have cleared and record any interest, finance charges or fees charged to your account.
Optional: Using Bank Reconciliation is optional, however, it is a good way to make sure all items that appear on your credit card statement have been entered into Procare. If you choose not to do reconciliation you may include any finances charges & fees when you record the payment.

Credit Card Payments

  1. Enter the credit card company as a New Vendor.
  2. Set up the Standard Account Numbers for the vendor.
    1. Use your actual bank account as the Checkbook (the account the payment comes from).
    2. Place your contra asset under the GL Account column (the account the payment is applied to).
    3. Check the box to Automatically Import these items.
    4. If you are not using the reconciliation feature to record finance charges and fees then include a second GL Account number for your credit card fees expense account.
  3. Enter a Vendor Check for the payment. If it is an electronic transaction (rather than an actual check) use a check number like 999 to indicate so.

Note: If you are not using the reconciliation feature to record finance charges and fees then apply a portion of your payment to your expense account (the amount charged on your statement for interest & fees), and the remainder of your payment to the contra asset.

Checking Your Balance
To see how much you owe run a report like the Balance Sheet. Go to Reports > Standard Reports > Expenses & Ledger > General Ledger Reports – Regional > Balance Sheet.

The Beginning Balance will show what you owed at the start of the period (like the start of the month), while the Report Period column will show how much that has changed during the month and the Ending Balance, of course, shows the amount owed at the end of the period. Remember, the amount you owe appears as a negative number.

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