Accounting 101

Kathryn See
Kathryn See Member ✭✭

How do you properly set up a payment/transfer from Checking to Credit Card or Savings? Do you set it up as a Transfer Reminder or a Bill under Bills & Income? I have all my accounts loaded on Quicken, and have a Special Savings category added under Planning, Savings Goals. I currently have any transfers set up as Bills, and when the transaction comes through, it posts payment correctly in Credit Card and Savings account amounts correctly, but I'm out of balance in my checking account for those amounts added exactly. Thanks in advance! I'm using Quicken Deluxe latest version.

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Answers

  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭

    I must admit I'm not following exactly with what you're saying here. If real transactions - even future dated ones - are entered in your checking Account and properly show up in other real Accounts - like a credit card payment - then there is no way that the checking Account should be "out of balance" with (presumably) the real-world bank account at whatever financial institution you use.

    Now if you're actually referring to "Savings Goals" transfers here, that's a horse of a different color. Those fictional transfers out from the checking Account certainly can put your checking Account out of balance with the real-world bank account because, well, the transfers are fictional. For real-world bank Account balances you need Quicken to ignore the fictional transactions. You can do that by right-clicking on a Savings Goal in the Account Bar (vertical column of Accounts in Quicken to the left or right of the screen) and deselecting "show Savings Goal transactions in registers and reports."

  • Kathryn See
    Kathryn See Member ✭✭

    Thank you Tom Young. I have a credit card at the same bank as my checking & savings. When the payment comes through, I want it to take from my checking, and register as a payment in my credit card account (which is set up automatically at my bank). My question here was do I set the payment up in both Bills And in Income Transfers? Do I mark both in Bills and in Income Transfers as paid?

    The other question was on credit cards at different banks (automatically paid from my checking from those banks). Again, I want to reduce my checking account balance and record payment in their respective accounts.

    And thirdly was the Savings Goal which I've figured out.

    On my budget for those credit card accounts, I'm assuming that I add the accounts at bottom of budget for "To Chase XXXX"?

  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭

    As to the first question two questions - the payment of the credit cards - I'd simply set them as a Bills as that's exactly what they are; the "same bank" vs "not same bank" is irrelevant. Yes, they are also "Transfers" in Quicken-speak but there's no need to use that here. You want the exact same accounting entry to occur in either case: a reduction of your cash and a reduction of your credit card liability.

    To get this entry correct each and every time I'd set up a Reminder for each bill, set up to post to your Accounts "as of" the due date but recorded a week or so before the actual due date. You typically get credit card statements about 3 weeks before the due date. When the statement shows up you reconcile the credit card Account and then modify the Reminder to the correct dollar amount. The Reminder makes the entries a week before the due date - giving you visibility to your future cash needs, and when the downloads occur shortly after the payment is actually made, the transactions is found as a "Match" in each Account. (Typically the credit card Account will record the "Match" before the bank Account, but it might be the same day in the case of the credit card issued by the same bank as is holding the checking account.)

    "On my budget for those credit card accounts, I'm assuming that I add the accounts at bottom of budget for "To Chase XXXX"?"

    It's up to you how you want to account for credit card payments. The "Budget" is really "income and expense" oriented, not really "cash flow" oriented, and the payment of a credit card simply isn't an "expense" as accountants use that term. You incur expenses by using your credit card to buy stuff, those are the true "expenses", and the monthly payment to the credit card issuer is simply reducing your liability, a "cash flow" event. But these are your accounting statements so feel free to do whatever makes the most sense to you.

  • Kathryn See
    Kathryn See Member ✭✭

    Tom Young, thank you for making this completely clear to me. I really appreciate you taking the time to reply! Have a wonderful Holiday Season!

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