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

Businesses often treat cash-back rewards from credit card transactions as additional income or to offset expenses, effectively lowering credit card costs. Recording these rewards in QuickBooks helps maintain accurate financial records, supporting better financial management. Cash-back rewards function as a “contra-expense” on the Profit & Loss statement, showing as a reduction in expenses rather than income. Businesses can apply these rewards to pay down debts, cover other expenses, or reinvest back into the business for growth.

Why is it important to record “Cash Back Rewards”?

• Accurate Financial Records: By recording the cashback rewards, businesses know about all revenue and spending sources of the business.
• Reporting Taxes: The cashback rewards points are considered taxable income and so must be filed with the IRS. This helps the businesses in providing tax benefits.
• Tracking business expenses: Businesses can monitor business expenses by tracking their cashback rewards.
• Planning and Budgeting: It provides businesses with insight into potential savings and assists them in making informed decisions regarding credit card usage.

How to Record credit card cash back rewards in QuickBooks Desktop?

Part 1: Create an Income account

Step 1: Locate to the Chart of Accounts

1. Press on the List menu on the screen.
2. Select the Chart of Accounts option.

Step 2: Pick the Account details

1. Click on + New from the Account drop-down menu.
2. Choose the Income option from the Account type window.
3. Hit on Continue.
4. Put the Account name and other required details.

Step 3: Save the transaction

1. Once you are satisfied, Click on Save and close

Part 2: Record the Cashback Reward

Step 1: Navigate to Credit Card Charges

1. Click on the Banking menu on the screen.
2. Select the “Enter Credit Card Charges” option.

Step 2: Enter the transaction

1. Click on the Refund/Credit button on the screen.
2. Put the name on the Purchase From field.
3. Choose the income account.
4. Enter the amount.

Step 3: Save the transaction

1. Once you are satisfied, Click on Save and close

How to Record Credit Card Cash Back Rewards in QuickBooks Online?

Part 1: Create an income account

Step 1: Navigate to the Chart of Accounts

1. Click on the Accounting menu option from the left-panel menu.
2. Click on the Chart of Accounts.

Step 2: Select the Account details

1. Click on + New.
2. Choose the income option in the Account Type field.
3. Select the Detail type. [ You can ask your accountant if you’re unsure about the Detail Type.]
4. Mention the account name in the Name field. [e.g., Other income or cashback rewards ]

Step 3: Save the transaction

1. Once you are satisfied, Click on Save and close

Part 2: Record the cash back reward

Step 1: Select the Account

1. Click on +New.
2. Choose the Credit card credit option.
3. Locate the account from the Bank/Credit Account from the drop-down menu.

Step 2: Enter the Transaction

1. Choose the account that you have for cash back rewards from the Category details option on the screen.
2. Mention the other required information

Step 3: Save the Transaction

1. Once you are satisfied, Click on Save and close

Conclusion

Businesses must record cash back rewards in their QuickBooks accounting software to maintain complete records of all incoming auxiliary income and gains. Cash back rewards are recorded as revenue in the company’s books of accounts and are shown in the Statement of Profit and Loss as income received.

Frequently Asked Questions!

What if the Cash-Back Rewards are Given as a Check or Direct Deposit?

If the cash-back rewards are given to you as a check or a direct deposit, treat them as a deposit transaction:

• In QuickBooks Desktop, go to Banking > Make Deposits and enter the reward amount, selecting your cash-back rewards account.
• In QuickBooks Online, go to + New > Bank Deposit and choose the income account set up for cash-back rewards.

Do I Need to Treat Cash-Back Rewards as Taxable Income in QuickBooks?

Cash-back rewards are generally considered a reduction of business expenses rather than taxable income. When setting up an income account for rewards, consult with your accountant to determine if any portion of it may be taxable. Most businesses, however, treat cash-back as a deduction on expenses, which lowers their total business expenses rather than adding it as taxable income.

Can I Categorize Cash-Back Rewards as Income from other Financial Institutions?

Yes, if you receive cash-back from various sources, you can set up multiple income sub-accounts under “Cash-Back Rewards” or “Other Income” to track each one individually. This is especially useful if you want to keep cash-back from different cards or programs separate for better visibility. In QuickBooks Online, you can use + New > Bank Deposit and select the sub-account for the specific reward source.

Disclaimer: The information outlined above for “How to Record Cash Back Rewards in QuickBooks Desktop and Online?” is applicable to all supported versions, including QuickBooks Desktop Pro, Premier, Accountant, and Enterprise. It is designed to work with operating systems such as Windows 7, 10, and 11, as well as macOS.