concepts

Credit Card Purchases

Last Revised: 03/02/23

Most businesses make some purchases by credit card which can include products purchased for resale as well as normal business expenses such as office supplies, vehicle repairs and fuel, utility bills, etc. In order to provide the most accurate financial statements, it is important to record all purchases that are paid by credit card properly.

Options

There are two basic options for recording credit card purchases.

Option 1 - Record each purchase from the credit card receipt as purchases are made. Select this option if credit card purchase receipts are typically made available to the accounting department as purchases are made.

Option 2 - Record each purchase from the credit card statement. This option is typically much easier, especially when all credit card receipts are not readily available. One disadvantage to this option is that you are assuming that the credit card statement is correct, and that each purchase is accurately represented on the statement.

Setup for Both Options

• Vendor Maintenance - Credit Card Company

  • Create a Dynamo vendor for each credit card account that you have

  • Set the Payment Method in the Accounts Payable Options View to:

    • blank the if you want to print a check to pay the credit card bill,

    • "W" if you have provided the credit card company with your bank account routing and account numbers for automatic withdrawals, or

    • "T" if you transfer funds or use any online banking service to pay the credit card bill

  • Note that the A/P Vendor# located in the Accounts Payable Options View should be left blank for all Credit Card Vendors.

• Vendor Maintenance - All vendors that you might pay by credit card

  • Set the A/P Vendor# to the Credit Card Vendor in the Account Payable Options View

    • Do this whenever you might pay the vendor by credit card, even if you typically pay the vendor directly by check

    • You can always pay the vendor by printing a check or pay using online banking even when the A/P Vendor# is set

• Vendor Maintenance - Miscellaneous Vendors

  • Miscellaneous Vendors are used for one-time purchases where you don't anticipate buying from the vendor again in the future

  • Miscellaneous Vendors are identified in Dynamo by a single character such as "M" or "C"

  • When entering A/P invoices for these vendors, Dynamo will prompt you for the actual vendor name, and the mailing address when mailing a check to a miscellaneous vendor

  • Create at least two Miscellaneous vendors in Dynamo using the F2 option to manually assign the vendor#

    • "M" for Misc Vendors not paid by credit card, A/P Vendor# should be blank,

    • "C" for Misc Vendors paid by credit card, A/P Vendor# should be the credit card company vendor#.

      • To be used for gas stations, restaurants, special order inventory, or other one-time inventory purchases where you do not need to track purchases for the vendor.

• Purchase Order Receiving

  • Verify that all Purchase Orders have been received and updated for any such purchase made by credit card.

  • Note that you can use the Linked Purchase Order Receiving option in Sales Order Processing which is especially convenient for drop shipments

• Prepayment by Credit Card

  • In some cases, you must prepay for a purchase not yet received

  • Dynamo supports this situation and enables you to link an A/P Invoice for the credit card purchase to a Purchase Order that has not yet been received.

  • The Prepaid Inventory general ledger account must be defined and specified in G/L Interface Maintenance

 

Option 1 - Record Purchases from the Credit Card Receipts

Recording of Purchases

• Use A/P Invoice Data Entry to record the purchase.

• For purchases of inventory, a purchase order number is required and is the first entry.

• If the product has been received, then a receipt number is required and the General Ledger account should be Unvouchered Receipts.

• If the product has not been received and you are prepaying, then a receipt number is not required and the General Ledger account should be Prepaid Inventory.

• Post any shipping, handling or other charges to a different General Ledger account such as Freight Costs.

• If the credit card charge covers multiple receipts, whether for the same or different purchase order numbers, then create separate General Ledger distribution entries to the Unvouchered Receipts account number with the appropriate Receipt#.

• Note that the Unvouchered Receipts amount entered in the G/L distribution section, must match the received value exactly.

  • If the vendor charged the correct amount and the cost on the purchase order is incorrect, then:

    • If the products have not yet been sold, you should re-open the receipt, re-open the purchase order if necessary, correct the costs on the purchase order, then re-receive the products.

    • If the products have already been sold, you should post any variance between received value and billed amount to Cost of Sales.

• For one-time purchases from vendors, use the Miscellaneous Vendor#, i.e., "C" to record the purchase.

Recording the Payment to the Credit Card Company

• You may use either A/P Payment Selection or A/P Manual Payment Entry.

• A/P Payment Selection

  • During Payment Selection, Dynamo looks for any open invoices that are due based on the operator entered dates.

  • If the vendor for the invoice has an A/P Vendor# specified, then the payment will be made to that vendor#, typically the credit card vendor, instead of to the vendor where the purchase was made.

  • When reviewing the A/P Payment Selection Register, if there are invoices charged to the credit card that are not listed with the credit card vendor, then use Vendor Maintenance to set the A/P Vendor# to the Credit Card Vendor#, then re-run A/P Payment Selection, clearing the original batch.

  • If you discover invoices to a miscellaneous vendors paid by credit card that are not listed with the credit card vendor, then use A/P Invoice Maintenance to change the vendor number to the miscellaneous vendor# used for credit card purchases, vendor# "C" in the example above. Then re-run A/P Payment Selection.

  • Verify that the total payment amount for the credit card vendor matches exactly the amount shown on the credit card statement.

    • If the amounts are not the same, investigate each purchase on the credit card statement to confirm that it was entered properly in Dynamo.

    • You can use A/P Invoice Search, typically by amount, to search for the invoice in Dynamo.

    • You may need to use A/P Invoice Entry, Register, and Update to record additional invoices.

    • Re-run A/P Payment Selection, clearing the previous selection to confirm that the credit card statement balance is the same as shown in A/P Payment Maintenance or on the A/P Payment Selection Register.

    • Use A/P Payment Selection Maintenance to remove any invoice that has not yet appeared on the credit card statement or any vendor that you plan to pay directly not by credit card.

  • If the Credit Card statement includes any interest charge, you will need to enter an invoice for that charge using A/P Invoice Entry, Register and Update. Use the Credit Card Vendor# as the vendor# and Interest Expense for the General Ledger Account.

  • Once the payment amount is correct, then continue with the payment process of A/P Check Printing, A/P Check Register, and A/P Check Update.

• A/P Manual Payment Entry

  • Select the option to Print a Check or Record a Payment based on how you pay the credit card company.

  • Enter the Credit Card Company as the vendor to be paid.

  • If payment is made by automated withdrawal, then enter the withdrawal date as the payment date.

  • In the invoices to be paid section, select the existing invoices entered as described above for payment.

  • If the Credit Card statement includes any interest charge, use the Create New Invoice option to record a new invoice allocated to the Interest Expense general ledger account.

  • Once the total payment amount matches the payment amount shown on the credit card statement, proceed with A/P Manual Payment Register and Update.

 

Option 2 - Recording Purchases from the Credit Card Statement

Recording of Purchases and Payment to Credit Card Company

• After receiving the credit card statement, use A/P Manual Payment Entry to Print a Check or Record a Payment as required.

• Enter the payment date as the automated withdrawal date, check date, or date of manual transfer of funds as required.

• In the Invoices to be paid section, create new invoices for each purchase that appears on the credit card statement.

  • Select the vendor where the purchase was made from the list.

  • If the vendor is not included in the list, use Vendor Maintenance to set the A/P Vendor# as described in the Setup section above. You will need to exit the payment and select an existing payment so that the vendor appears in the list.

  • If the purchase was from a Miscellaneous Vendor such as "C", then enter the actual vendor name where the purchase was made.

  • If the purchase was for inventory or resale, then enter the purchase order number or select from the list.

  • Just touch the Enter key to skip the purchase order# if the purchase was not for inventory or resale.

  • Enter the purchase date as the invoice date.

  • Enter an invoice number when available, but typically there is no invoice# available on the credit card statement, so you can accept the default invoice number generated by Dynamo which is based on the invoice date.

  • If the purchase was for inventory already received, the receipt number and Unvouchered Receipts general ledger account should be automatically displayed in the G/L distribution section.

  • Enter any shipping, handling or other charges as a separate line in the general ledger distribution section of the invoice.

  • Resolve any variance between the received value and billed value as described in Option 1 above.

  • If the purchase was for inventory not yet received, i.e., prepaid, then the Prepaid Inventory general ledger account should be automatically displayed, without any receipt#.

  • If the Credit Card statement includes any interest charge, use the Create New Invoice option to record a new invoice allocated to the Interest Expense general ledger account. Use the Credit Card Vendor# for this invoice.

• Once the total payment amount matches the payment amount shown on the credit card statement, proceed with A/P Manual Payment Register.

• The A/P Manual Payment Register will list each purchase including vendor name where the purchase was made. Compare the Register to the credit card statement.

• Return to A/P Manual Payment Entry if any additions or corrections are required.

• Use A/P Manual Payment Update to complete the process.