Accounting Entries for Credit Card Processing

Normally, there is a day or two delay between the time a credit card charge is submitted and approved and the time the deposit is actually made to the bank.  QuickBooks automatically sets up a clearing account, an "other current asset" account named "Undeposited Funds", to handle this delay.  This allows the sale to be posted on the date of the transaction and the actual deposit to be deferred to the date of deposit, which makes bank reconciliations a snap; especially when multiple charges are deposited on the same day. 

Below are the accounting entries in chronological order and, then, by income statement and balance sheet account.

For those QuickBooks users who use Intuit Merchant Services to process credit cards this accounting process is almost fully automated.  From the "Enter Sales Receipts" form you can even swipe a credit card using an inexpensive card reader that plugs into a USB port on your computer.  If you don't have the card available to swipe, you can enter the credit card information manually.  If you already have credit card information in the customer master, it is automatically entered for processing with the exception of the "CCV" code.