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Credit cash back rewards are the type of income you receive as a percentage of your expenses that incur or purchases that you make by using a credit card. You may also get the cash back rewards on receiving a new credit card, that you may want to record in your QuickBooks account. If you have no idea how to enter credit card cash back rewards in QuickBooks, we will guide you.
In this particular guide, we will draw your attention to the two types of approaches to record the credit card cash rewards. Besides that, you can learn how to record credit card rewards in QuickBooks in three simple steps. Let’s read ahead!
Credit Card Cash Back Rewards in QuickBooks
Before learning how to record cash rewards in QuickBooks, learn about credit card cash back rewards. Credit card companies often send cash back rewards as a promotional offer to their users or customers. If you use QuickBooks accounting software, you can enter the cash back reward in your account. Since these are only receipts so these are entered as other income in your accounting books. However, in some cases, you may see them as discounts or adjustments to the purchase but not income.
Hence, you need to select one of the following options (offset of expenses and create the new income account) to enter the cash back rewards in the QuickBooks account. Let’s read more about both approaches for recording the cash back rewards and how they affect the transactions in QuickBooks.
Approach 1: Offset of Expenses
If you go on a trip and spend a good amount of money on travel fare then you can apply the rewards refunds to the same category of the travel expenses that you used for the transactions. Then, you can split this transaction into several expense accounts. However, with this approach, you would not be able to see a true analysis of your expenses at the end of the year. This will rather show that you have spent less than you actually did.
Approach 2: Create a New Income Account
The statement of cash back or credits that you receive on your credit card will appear in the income account. Although the refund is categorized by income, it still will not be part of your gross receipts. This as a result will not affect your revenue analysis.
In the following discussion, you will explore how to record cash rewards in QuickBooks Desktop with a series of steps.
How to Record Cash Back in Accounting?
To record the cash back, one has to create an income account in QuickBooks. Once the income account is ready, you can start creating the credit cards for your cash back rewards. Doing so, you can easily record the cash back rewards. For detailed steps, you can read the following details and learn how to record cash back rewards in accounting:
Step 1: Prepare the Income Account in QuickBooks
Before you learn how to enter credit card cash back rewards in QuickBooks, you need to create an income account first. For this, you can go through the following steps:
- Launch “QuickBooks Desktop” on your computer.
- Then, select the “Accounting” option.
- Switch to the “Chart of Account” tab.
- Here, you can click on the “New” button.
- Now, choose the “Income” option from the “Account Type” section.
- Click on the “Detail Type” option.
- At this point, you can go to the “Name” field and add the desired account name.
- Once done, click on the “Save and Close” button.
Now that you have created the income account, it will be easy for you to add credit card cash back rewards. However, before doing so, you will have to create a credit card for the cash back rewards. Know more in the next step.
Step 2: Create the Credit Cards for Cash Back Rewards
By creating the credit card, you can easily add the cash back rewards to the dedicated columns. Follow these steps to add the credit card, account details, and cash back amount:
- Navigate to the “Create (+)” button.
- Then, click on the Credit Card” option.
- Select the “Payee” option.
- Now, you can add the appropriate “Credit Card Account” option.
- Switch to the “Account Details” field.
- At this point, you can add the “Income” under the column of the “Account” you just created.
- Once done, you can enter the amount of your cash back.
- After adding the details, click the “Save” button and close the window.
Once you add the credit card with relevant information, you can continue recording the cash back credit rewards. Learn more in the next step.
Step 3: Record Your Cash Back Credit Rewards
In this step, you are required to record your credit rewards received by cash back. For this, you can go through the following steps:
- Switch to the “Banking” field.
- Then, click on the “Credit Card Charges” option.
- After this, select the “Purchased” field.
- Now, you can add the name in the field.
- Once done, press the “Create Account” option.
- Here, you can enter the amount.
- After that, click on the “Save and Close” button.
By following these steps, you can add the cash back amount received on your credit card. Remember that the refund is only classified by income, however, it will not be part of your gross receipts, and neither will it affect your revenue analysis. Now you have learned how to enter credit card cash back rewards in QuickBooks.
How to Categorize the Cash Back Rewards in QuickBooks?
The cash back reward you receive from the credit card account is not usually a part of the business income. Hence, you can easily classify the downloaded transaction as your personal transaction within the computer. Here are the following categories to which you can add your cash back rewards.
- Business Income
- Assets
- Commissions and Fees
- Truck and Car
- Home Office Expenses
- Healthcare
- Supplies
- Interest Paid
- Personal Deposit
- Office Expenses
- Taxes and Licenses
- Personal Withdrawal
- Travel
QuickBooks also has added some of the new categories to which you can add your credit card cash back rewards. These are as follows:
- Car and Truck: For vehicle loan
- Advertising: Listing fees
- Transaction and Processes Fees
- Commission and Fees: Broker/ Referral / Selling Fees
- Interest Paid: Mortgage, Business loan
- Insurance: Other property insurance
- Rent and Lease: Lease and Equipment Rent
- Other Business Expenses: Uniforms, Furniture, Uniforms, Subscriptions, or Membership.
The aforementioned categories are just for your information that you can classify your cash back rewards within specified categories.
While you enter cash back rewards in your QuickBooks account, there are certain issues you may encounter. For instance, you may come up with questions like what expense you can use for the cash back amount on your Debit card or what you should write in the Description field. This happens when you have no clue where your money was spent.
To Sum Up
If you have received the cash back rewards by using your new credit card, you can record the cash back amount in QuickBooks. However, this will not be linked to your business income, you can still categorize the downloaded transactions within certain categories provided by QuickBooks. We hope you have learned how to enter credit card cash back rewards in QuickBooks Desktop, QuickBooks Online, and Desktop Pro versions.
In QuickBooks, you can set reminders for the due transactions and export the accounting data from online to the desktop version:
Ans. Users receive a cash back reward when they use the credit card for expenses or purchases. Credit card companies offer such cash backs as a promotional activity that can be recorded in QuickBooks.
Ans. Most cash backs offered by credit card companies are not taxable. However, you should check for ones who don’t have an expenditure threshold required to redeem the rewards. Although such rewards are quite beneficial. Hence, you might need to report these benefits as your income while you file the taxes.
Ans. The cash back rewards received by your credit card are usually not a part of your business revenue. Therefore, you can classify the downloaded transactions as Personal. There are other categories provided by QuickBooks that you may use accordingly.
Ans. To record the cash back rewards in QuickBooks, you need to have an income account. Once you create the income account, set up the credit cards for cash back. Later, you can add the correct cash back or reward amount in the dedicated fields.