The first danger is related to a machine called an ATM. You know the ones. You stick your debit card (or credit card) into them, punch in a code and you magically receive cash in your hand. With your debit card, there is generally little, if any, transaction fee when used at your bank or specifically designated ATM machines. It is very convenient.

So what’s the problem with that, you may be thinking. The problem with that for a business owner is that you must now account for that cash. You need to provide receipts showing how that cash was spent. If you cannot do that, as far as the IRS is concerned, you took a personal cash draw out of your company and you’ll need to record it as income. If it was cash used for personal purposes, then that’s just how it should be recorded anyway, but if you spent it on business related expenses and didn’t get receipts or lost the receipts, you have nothing to document that expense and you won’t be able to claim it as business expense. Now YOU might never do such a thing, but…there of plenty of other business owners who have, and their accountants are probably reading them the riot act about it. It can be very tempting to do, but don’t let that little debit card talk you into it. Resist!

The second danger of a debit card is really shared just as equally with credit cards and is related to the cash issue. It is the issue of missing receipts. You use your card to order something online or to purchase gas, meals or other items while you are away from the office. There is no problem with doing this…as long as you keep your receipts and turn them into your bookkeeper or accountant. Again, I’m sure YOU do that, but, again, there are other business owners who are bit careless with their receipts. Occasionally, they clean out their glove compartment or their billfold and hand the pile to the proper person, but this is not done regularly, and there are generally several receipts missing. With these, at least there is a record on the bank statement or credit card statement regarding the transaction, so that a receipt can be obtained. However, obtaining receipts after the fact means extra time is being spent by your staff that shouldn’t be necessary.

Debit cards. They’re the little devils in your billfold that accountants love to hate.

If your company is considering the addition of gift cards or gift certificates as an option for your customers, it will be important to understand the accounting that will be required to track these items.

Issuing the Gift Card

When you issue a gift card or gift certificate to a customer or donate one to a charitable event, the transaction needs to be recorded in your books as a liability. You may label the account Gift Card Liabilities or Unredeemed Gift Cards, but the account should be listed with your current liabilities. The sale of a gift card would be recorded with a debit to cash and a credit to the gift card account. The donation of a gift certificate would be recorded with a debit to charitable contributions expense and a credit to the gift card account.

Redeeming the Gift Card

When a customer uses a gift card or gift certificate as full or partial payment on a sale, the full amount of the sale will be credited to the sales income account, and the amount of the gift card or certificate used will be debited to the unredeemed gift card account, decreasing its balance.

It will be important to track the amount of each individual gift card or gift certificate issued in order to be able to reconcile the account. Using a numbering system for tracking gift cards is preferable for ensure that all cards are accounted for. Your tracking system should allow you to look up the balance on any given gift card and the date the card was issued. Current law requires that gift cards purchased must remain on your books and available for redemption for a minimum of five years.

If you are using a computerized POS system for your sales, you will want to check with your service provider regarding how to properly record the sale and redemption of gift cards through your particular system. A thorough POS system will have gift cards as an option and be able to provide a detailed accounting of your gift cards for you.

QuickBooks is an accounting application and FreshBooks is an invoicing application. They are two different things, but in the end to have your data matching in both, there could be a ton of double entry resulting in valuable time consumed and strenuous effort.

You can have your data accurate in both, while not matching in both. Matching and accuracy are two different things. For all of the numbers to match up, it is a matter of accuracy. To have all of the details such as sales items etc. it would be a matter of matching.

In this blog post, I will begin to show you ways to get accurate data from FreshBooks into QuickBooks.

This blog post is Part 3, if you have not read the previous posts, I suggest that you do:

Part 1: Methods 1 & 2 to getting FreshBooks Income into QuickBooks

Part 2: Method 3 to getting FreshBooks Income into QuickBooks

Also useful, is my post: Handling Credit Card and PayPal Processing Fees in QuickBooks, which has a short segment relating to FreshBooks as well.

On to the good stuff!

So, you have your income or receivables in QuickBooks, you may have even taken out your PayPal or Merchant Processing Fees. However, you don’t have your sales tax anywhere, as a matter of fact, it is showing as an Income and we all know your Sales Tax is NOT an income.

Well let’s correct that, shall we?

Just to recap… if you charge sales tax, your sales tax is included in the numbers that you entered from FreshBooks, so it is very important that you remove your sales tax from your revenue/income accounts and allocate it to your sales tax payable account.

1. Go into your FreshBooks Account

2. Click on the Reports Tab

3. Click on the Tax Summary Report in the first column

4. Select the month in Question that you want to enter.

5. In the Revenue section, you have to pick either Billed (Accrual) or Collected (Cash Based) – the choice you pick will be determined by the income entering method you have elected to use (based on previous posts). If you selected Methods 1 or 2 where you are accounting for your receivables you will select the Billed (Accrual) method. If you selected Method 3 where you are only accounting for your payments received you will select the Collected (Cash Based) method.

6. Once you have the amount/totals from your report (sorry I can’t give you a screen shot, I don’t have sales tax inside of my company) go into QuickBooks, select Company from the file menu and Make Journal Entries.

7. Enter the end date of the month you have pulled your sales tax details for.

8. In the first row from the account drop down box, pick your Income Account (mine is IAC Professionals Service Revenue), tab over to the debit column and enter the total of your sales tax from your sales tax report.

9. In the second row from the account drop down box, pick your Sales Tax Payable account (this should always be Sales Tax Payable) and in the credit column enter the total of your sales tax from your sales tax report. In this row you will also need to enter the name of your Taxing Agency in the Name Column. If it is not yet in your Vendor List, click Add New and create it. For example, mine would be State of Florida Sales Tax Department.

10. Press Save and Close

This has removed the actual sales tax portion of your revenue, out of your revenue and into your sales tax liability account, enabling you to use the ‘Pay Sales Tax’ feature inside of QuickBooks.

Do you have any questions or specific circumstances that I did not help you with? Feel free to comment on the post with your question(s) and I will respond personally!