How to Record Fraud Charges in QuickBooks Online

Unfortunately, in today’s day in age, fraud is a prevalent thing in society. Much of the time, you have no clue where you swiped your card and when it was stolen.

As a business owner this can greatly hurt cashflow if a bank account is over drawn or a credit card was charged too much and reached its limit.

First round of defense is to pay attention to your banking transactions and when something if off, make sure you contact your bank or credit card company so that they can get stopped and the charges refunded.

We are going to use the QuickBooks Online Sample company today to walk you through recording fraud charges that come through your bank or credit card account as an expense and then the corresponding refund of those fraudulent charges.

 This process is the exact same process for QuickBooks Desktop.

First Step is to create a balance sheet account where the charges will go and eventual be refunded.

1.       Go to your Chart of Accounts and Select on the green “New” Button

2.       Next Select on the “Asset” for the category

3.       Then under “Save Account Under” Select “Other Assets”

4.       Then under “Tax Form Section” select “Other Long-Term Assets”

5.       Under “Account Name” type in “Fraud Charges”

6.       Finally, click the “Save Button”

The reason why we want to create this account as an “Other Asset” account on the balance sheet and not an expense on the profit and loss as these charges are not true expenses since they will be refunded. The other reasons are if these charges took place at the end of the year, and you expensed them out; then when you are finally refunded in the following year – your expense is lowered by those refunded charges. Thus, increasing your taxable net income for the year.

Since they are reported on the balance sheet – there is no impact on your profit and loss since this we are increasing the asset balance with the Fraud Expense and decreasing this same account with the refund/reimbursement of the fraud charges.

Now that the “Fraud Charges” other asset account is created – the next step is to find the fraud charges and assign those expense transactions to the “Fraud Charge” account.

Navigate to your bank feed section in QuickBooks Online and locate the charge/s.

1.       Click on the charge to open the edit window in the bank feed

2.       Enter in the vendor’s name that the charge came from

3.       Under “Category” select “Fraud Charge”

4.       Select Add

If you run a balance sheet report – you will see the “Fraud Charge” asset account has increased by the fraudulent charge amount. Again, it has no impact on your profit and Loss report and/or income.

Let’s say you reported the charge/s to your bank or credit card company, and they have refunded the money back to your account/card.

Navigate to your bank feed section in QuickBooks Online and locate the refund.

1.       Click on the deposit/received transaction to open the edit window

2.       Enter in the vendor’s name of the charge you are being refunded

3.       Under “Category” select “Fraud Charge”

4.       Select Add

Now if you run the balance sheet again as of the refund date – you will see the “Fraud Charge” account is now zero.

If you had multiple fraudulent charges and only a few have been refunded to date – you will at least see the balance that is still owed to be refunded to you and will prompt you to check in with your bank/credit card company on the ETA for the rest of the refunds.

I hope this quick lesson and video were helpful in teaching you the step-by-step process in recording fraudulent charges and the corresponding refunds in your QuickBooks Online and QuickBooks Desktop.