I'm trying to figure out which accounts get credited and debited when recording credit card payments when the payment hasn't been applied to an order yet.
When a customer submits a payment with a credit card, and it is not immediately applied to an order, you would record the amount in an "unsettled funds" account (which represents the credit card merchant account) and an "unapplied payments" account which represents money we have, but haven't put towards an order yet. Both "unsettled funds" and "unapplied payments" are asset accounts.
Except that can't be right, because a $100 payment, recorded in both asset accounts would be recorded as $200 in new assets which didn't happen. Also, there is no account to offset against, which is required for double-entry bookkeeping. (It can't be revenue that gets credited, because the credits to revenue are based on the order, which is not known at the time the payment is recorded.)
So how do you record an unsettled and unapplied payment? And what gets credited? It seems like "unapplied payments" should be a liability account not an asset account...
When a customer submits a payment with a credit card, and it is not immediately applied to an order, you would record the amount in an "unsettled funds" account (which represents the credit card merchant account) and an "unapplied payments" account which represents money we have, but haven't put towards an order yet. Both "unsettled funds" and "unapplied payments" are asset accounts.
Except that can't be right, because a $100 payment, recorded in both asset accounts would be recorded as $200 in new assets which didn't happen. Also, there is no account to offset against, which is required for double-entry bookkeeping. (It can't be revenue that gets credited, because the credits to revenue are based on the order, which is not known at the time the payment is recorded.)
So how do you record an unsettled and unapplied payment? And what gets credited? It seems like "unapplied payments" should be a liability account not an asset account...