In previous Post you have seen different options for Credit Card payment selection , here we are going to details about the accounting entry under different payment options option is used.
Where is recording
Normally , the payment to the credit card company will result in a decrease in the Cash account. This can be achieved by crediting Cash. The debit amount or amounts will depend on whether the credit card transactions were previously entered in the accounting records.
For example, if the credit card purchases had not been previously entered, then there will be debits to the accounts that are appropriate for the charges. Let’s assume that credit card transaction was for an Confrence Trip . That amount might be debited to Confrence Trip Expense. If the this time credit card transactions were for airline tickets and hotels, you might debit the account Travel Expenses for those amounts.
However, it is possible that the credit card bill was recorded in the accounts prior to paying the credit card bill. Using the example above, the accountant may have debited Confrence Trip Expenses and Travel Expense, and credited Credit Card Payable at the time the bill or statement was received. If the credit card bill is paid two weeks later, the payment will be recorded with a debit to Credit Card Payable and a credit to Cash.
Expenses Clearing Account
This account is required when you use the Company Pay payment option of Oracle Internet Expenses. Payables uses this as a temporary account to record credit card transaction activity. Payables debits this account when you create an invoice to pay a credit card issuer for credit card transactions. Payables credits this account with offsets to the original debit entries when you submit Expense Report Import for an employee expense report entered in Internet Expenses that has credit card transactions on it.
Accounting for Credit Card Transactions
In previous Post you have seen different options for Credit Card selection , lets see the accounting entry under different payment option. In order to get indepth, lets assume a user have booked a expense report of $1150 and those were created with these details:
- Cash and Other Expenses: $500
- Credit Card Business Expenses: $650
- Credit Card Personal Expenses: $299
You should assume that the total credit card transactions received from the credit card provider was $949 (the sum of the business and personal expenses). In addition, assume that there are no employee advances applied to the expense report. This table summarizes who will be invoiced based on the payment scenario.
When the employee’s invoice is first imported into Payables, the invoice amount at the header level will equal the Amount Due Employee as noted above. This table describes the complete accounting for all invoices created (note that all lines shown as expense lines, no matter they are business or personal, represent the invoice distribution lines for the invoices):
Lets see how the accounting entry goes under three different senarios as mention in Previous Post.
1 .)Individual Pay : The employee pays the corporate card provider for all credit card transactions. The employee is reimbursed for all business expenses when the expense report is approved.
The accounting goes like
2 .)Both Pay : Employee pays the corporate card provider for personal expenses and your company pays the corporate card provider for business expenses. The card provider is reimbursed for business expenses when the expense report is approved. This is also referred to as joint liability.
3 .)Company Pay : The company pays the corporate card provider for all transactions. The company can choose to pay the corporate card provider at any time, depending on the payment terms. Submission or approval of expense reports are not required for payment to the card provider.
To create invoice due to a credit card provider, following entries are created. Note that all credit card transactions are charged to the Expenses Clearing account.
As outlined above, when the Company Pay payment scenario is used, there are two different points in the process when accounting entries are created in relation to the clearing account. The first accounting entry is created when the invoice due to the credit card provider is created.
The second accounting entry is created once a user submits their expense report and it is imported into Payables by running Expense Report Import. The first four lines in the accounting entry are the actual lines that will be seen in the invoice Distributions window in Payables for the invoice due to the employee.