How to Record Cash Back Rewards in QuickBooks Desktop and Online?

Reliable financial records can be attained through accurate tracking, recording, and categorizing of business expenses. Credit card rewards must also be tracked down and recorded to identify financial costs and income.

This article will give you insights into the process of how to record cash-back rewards in both QuickBooks Online and QuickBooks Desktop.

What is Cash Back Rewards?

When you apply for a new business credit card, there are times when you are bound to receive cash-back rewards. Credit card rewards are generally not considered income and are not included in your balance sheet.

However, a cash-back reward is considered other income and will be recorded in your balance sheet. It shows the significance of recording cash-back rewards received from credit card bonuses.

Other than that, several other reasons make recording cash-back rewards essential for businesses.

What Are the Reasons for Recording Cash Back Rewards in QuickBooks?

Some of the reasons that are prominent for recording cash-back rewards in QuickBooks are as follows:

Maintaining Accurate Financial Records

Recording different income sources ensures an accurate reflection of your financial performance. It can help in making various decisions and strategies for the development of your company.

Categorizing Income Streams

You can differentiate between various income sources and accounts that provide you with regular and other reward incomes. Categorization of income streams therefore allows transparency and a better understanding of a company’s financial health.

Complying with Tax Regulations

There are specific rules in your jurisdiction based on your location. Therefore, tax requirements depending on income source can vary. Recording cash-back rewards can assist in complying with tax regulations.

Tracking Earnings and Savings

Recording of these rewards allows users to monitor their overall earnings and savings from them. It gives insight into the outcomes of these rewards on the financial health of a company.

Reconciling Credit Card Accounts

Reconciling bank accounts in QuickBooks is a significant part of the accounting software. Therefore, proper recording of these rewards ensures that they are correctly reported in your credit card accounts.

This assists in reconciling the account effectively and maintains credit card balances. Therefore, managing and categorizing them is essential for your business accounting.

Note: Make sure to consult with an expert or professional before recording your credit card rewards. This is because there may be variations in reward record results depending on your bank credit card benefits.

What are the Advantages of Recording Cash Back Rewards in QuickBooks?

The advantages of recording cash-back rewards can be many. As it provides a clear picture of the financial performance of your company, you can expect the following benefits:

Precise Financial Tracking

Better decision-making can be ensured by accurate identification of the overall financial health of a company. Cashback records can help in reflecting precise financial statements.

Enhanced Cash Flow Management

Recording cash-back rewards records, that are considered other income, enables companies to observe the inflow of funds. This will assist you to analyze the cash flow and manage them accordingly.

Improved Reporting and Analysis

Recording of cash-back rewards enables users to generate reports that include such earnings of the company. It can provide insights into the impact of the cash rewards on the business and the extent of these funds as the benefit of a business.

Easy Reconciliation Process

A reconciliation process ensures that the balance and financial records are correctly recorded, which further helps in finding discrepancies as well. Correct recording of cash-back rewards simplifies the reconciliation of credit card accounts associated with them.

Effective Categorization of Income

Categorization of income is done to identify the different types of income a company generates. Recording cash-back rewards will help in observing and differentiating between regular and other incomes.

Now that you know the reasons for and the benefits that come with recording cash-back rewards, let us delve into the “how to” process.

How to Record Cash Back Rewards in QuickBooks?

Cash-back reward recording can be slightly different in various QuickBooks versions. There is little difference in recording cash-back rewards in QuickBooks Online and QuickBooks Desktop.

Record Cash Back Rewards In QuickBooks Online

The process to record a cash-back reward in QuickBooks Online is as follows:

1. Head to the +New option.
2. Choose Credit card credit.
3. From the Credit or Bank Account drop-down menu, select the appropriate account.
4. Go to the Category section and choose the account that stores your cash-back rewards (it is up to you to set them as expense or income accounts).
5. Type the essential information that needs to be included.
6. Click Save and close.

Note: Make sure that you have an account to track your cash-back rewards. If there isn’t any, you must create one.

Creating a Sub Account or Parent Account

You can create up to five sub-accounts under a parent account that will help you break down your expenses, income, and other types of accounts.

1. Visit the Settings option and select Chart of Accounts.
2. Press New and then input an Account name.
3. Select the Account type and Detail type from respective drop-down lists.
4. Tick the checkbox beside the Make this a sub account option (if you want this to be a sub account), and then choose the Parent Account under which it should reside.
5. Go to the Opening Balance option if you choose an Asset, Bank, Liabilities, Credit Card, or Equity account.
6. In the ‘As of’ field, fill up the starting date.
7. You can add a memo in the Description box to put additional information about this account if you want.
8. Finally, click on Save.

Note: The account type of both the parent and sub account should be the same.

Record Cash Back Rewards In QuickBooks Desktop

You can use the following steps to record cash-back rewards in QuickBooks Desktop.

1. Visit the Banking tab.
2. Click on Enter Credit Card Charges.
3. Press the Refund/Credit button.
4. Type a name under the Purchase Form title.
5. Select your income account for the cash-back rewards and enter the amount.
6. Hit the Save and Close option.

Creating a Sub Account or Parent Account

1. Head to the Lists tab and choose the Chart of Accounts.
2. Select New from the Account dropdown.
3. Select an Account type (you can select Income if you want).
4. Press on Continue, and then add the Account Name and other necessary details.
5. Now, tick the Sub account of checkbox, and select the parent account from the “Sub account of” dropdown list.
6. Press Save and close.

Using these methods, you can record and track your credit card cash-back rewards easily.

Final Words

QuickBooks includes several facilities that allow users to improve their decision-making process for business development. Cash-back rewards are income that must be added to the balance sheet and financial statement of a company. It is also affected by tax regulations, which creates a projection of its importance.

This article described the reasons for, benefits of, and methods to track cash-back rewards in QuickBooks Online and QuickBooks Desktop. If you are still dubious about the process, feel free to contact our experts to receive a personalized response.

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Frequently Asked Questions

Q1. Are Credit Card Cash-back Rewards Taxable?

Ans: Yes, credit card cash-back rewards are considered income. Therefore, these are taxable. However, they can only be taxed if they are earned. There will be no tax deduction if you have not redeemed them yet.

Q2. Is the Categorization of Cash-back Rewards Essential?

Ans: Yes, It is beneficial in many forms as it can help you to identify the sources of your income. You can differentiate between your regular and other income to have an accurate report of your financial statements.

Q3. Can a Cash-back Rewards Account be Created in QBO?

Ans: Yes. Follow the below steps:

1. Navigate to the Chart of Accounts.
2. Select New.
3. Choose Other Current Asset as the Account type, and enter its name as Cash Back Rewards.