AP Credit Card Payments in Dynamics AX 2012

Some companies are heavy users of credit cards and find the idea of reconciling that activity in the same manner as they would a bank account easier and more efficient than other methods. Using this method to pay invoices is similar to most setups, the user would simply pay vendor invoices they’ve entered using a “Credit Card” payment method that is setup as a “Bank” in Dynamics AX. At the end of the month when the credit card bill arrives, the user would go into Cash and Bank Management and reconcile the credit card bank account as they would any other bank account by clearing the transactions that agree to the statement, and processing any transactions that were not recorded in AX.

Setting up of the Credit Card bank account and method of payment is reasonably straight forward

1. You’ll need to create a general ledger account to record the credit card transactions. This account will be linked to the bank and is generally a liability account. General ledger/Common/Main accounts.

AP Credit Card Payments in AX 2012

2. Set up a new bank account and tie it to the general ledger account created above. Cash and bank management/Common/Bank accounts.

AP Credit Card Payments in AX 2012

3. Create (or modify an existing) payment method to post to the new bank created above. Accounts payable/Setup/Payment/Method of payment.

AP Credit Card Payments in AX 2012

4. The final step here would be to bring in the beginning balance of your credit card statement. This can done by entering a General Journal transaction with a debit to “Account Type” Ledger – 200135, and a credit to “Account Type” Bank – CC. The net effect of this entry is a $0.00 transaction to account 200135 that gets the balance on the bank sub-ledger.

 

Now that the setup is complete, here’s how it works

1. For any vendor invoices that were paid via credit card, pay them in AX using the new method of payment that you just created. These transactions will result in the following:

  • Settle the invoice(s) being paid.
  • Create item(s) on the Credit Card bank account to be reconciled.
  • Create the following GJ entries to record the transaction:
    1. Dr. Accounts Payable – Cr. Credit Card Liability (new account you created)

2. When the monthly credit card statement arrives, we can reconcile it like any other bank account in Cash and Bank Management.

3. During the reconciliation process, we may have identified transactions on the statement that were not entered into AX. Those missing transactions can be entered with a GJ transaction.

  • To enter them as a GJ, debit the appropriate expense account and credit the credit card bank.

AP Credit Card Payments in AX 2012

  • Note – You can also enter these transactions on the credit card statement when you record it in accounts payable, but you need to be careful to balance the entry correctly.

4. Now that the missing transactions have been recorded, you can complete the bank reconciliation.

5. The last step in the process is to enter the credit card statement into accounts payable for payment.

  • When doing this, it’s important that you debit the credit card bank account to clear the balance in the credit card liability account that was created as you recorded the credit card activity.

AP Credit Card Payments in AX 2012

  • After the posting of this transaction:
    • Your credit card liability account should be $0.00 with the exception of any transactions posted after the statement period.
    • Your credit card bank account should be reconciled.
    • You should have a payable to the credit card company for the amount of the statement.

6. Lastly, pay the credit card statement as you normally would!

This post was written by Matthew Caffrey, AX Application Consultant at Tridea Partners. Tridea is a leading Microsoft Dynamics provider serving CA, AZ, UT, CO, NH and surrounding regions.