Reconcile a credit card with sub-accounts is a bit tricky. It’s one of those transactions that you may not discover you didn’t do exactly right until you hand your records over to your tax professional at year end.

He or she may look at the records and say why are the balances so weird or messy? And that’s when you realize that you should have been breaking out the payment every month by the sub-accounts and not applying it to the parent account.

So, you may be wondering what the messy cup of cocoa has to do with this story?  I looked for pictures for this article.  Searched “messy” and oddly, this came up.  It was perfect for me this week.  I am a self-professed “Non Cook”.  This is exactly what happens when I try (even when I microwave–oh my!).  But I am good at making reservations!  🙂

Reconcile a credit card with sub-accounts:  the scenario

When you connect the bank feed to the credit card account, for some banks it will connect all the sub-accounts.   The sub- accounts are the individual accounts that each employee has separately (separate credit cards).  In QuickBooks on your chart of Accounts this should be set up under one parent account or master account.  Just as you would see it when you get your credit card statement.  There should be a hierarchy.

The parent account or the master account never receives a transaction in the bank feed. When you use the parent account as the account for the credit card payment, this what causes the balances to be a bit strange.  Remember, when you import them in from the Bank feed, they drop into the individual accounts. Then if you reconcile the parent account and pay the credit card using the parent account, (the one without transactions) the balances have some weird negative balance results.

A quick way to check is to look is on your balance sheet.  Does your credit card section look like this?  It is quite obvious that these are not correct.  While the total may be accurate, it just looks like messy books.  So how to you rectify the issue?

Reconcile a credit card with sub-accounts: the fix

I have seen this on many of my new customers books. The easiest way to correct the issue is to make a journal entry. Offset the parent account payments with the sub-account totals. This is demonstrated in the video below. If a sub-account has a positive balance, which is typical, then you will debit that amount in the journal entry. The offset will be the parent account to make the journal entry balance out. Both the debits and credits have to equal.

Last piece of advice…

If you made this error throughout the year, adjust it and be done with it.  Moving forward, you will need one more journal entry and pay the credit card using the sub-accounts on the payment.  If you break it out as it is on the statement and as the transactions imported into the bank feed, you will have perfectly balanced books!    

So, thank you Sylvia for this question.  I am sure that you helped so many other people struggling with the exact same issue.

So, if you follow us on our Facebook group or on our page, QB Community Live.

Here is a post on how to fix duplicate bank feed entries for credit card payments that are already reconciled in QBO.  

If you have any questions or would like to see a future video on another topic, please reach out to me on Facebook.