My business credit card got hacked. For months, we were being charged for items that were classified as Cost of Goods Sold. We discovered this at the end of last month. Now we are going to be credited back for the fraudulent charges. For this month, if we have $10K of Cost of Goods Sold, but we are being credited $4000 for the prior 3 months fraudulent charges from out credit card. Would I simply record this month's Cost of Goods sold as $6K on my P&L?
USA How do I classify fraudulent expenses?
- Thread starter Kee
- Start date
Sounds like you're definitely getting the credit so there's a couple of ways you could deal with this.
Ideally, if you can, open the prior periods and post the respective amounts into the correct periods, that way your accounts over those periods will reflect the true position. Depending upon whom those prior months accounts have gone to, it might not be an issue to do that.
If that's not an option for you, then you can plonk the credit into the current period's cost of goods sold, but you'll need to provide commentary on it to explain the credit, along with a comparable as to what the cost of goods sold would've been had it not been for the fraudulent activity credit for 3 months along with what the prior months figures would've been too, which is really just going round the houses to get to the same result as opening the prior periods and posting the credit relating to each of the periods.
Ideally, if you can, open the prior periods and post the respective amounts into the correct periods, that way your accounts over those periods will reflect the true position. Depending upon whom those prior months accounts have gone to, it might not be an issue to do that.
If that's not an option for you, then you can plonk the credit into the current period's cost of goods sold, but you'll need to provide commentary on it to explain the credit, along with a comparable as to what the cost of goods sold would've been had it not been for the fraudulent activity credit for 3 months along with what the prior months figures would've been too, which is really just going round the houses to get to the same result as opening the prior periods and posting the credit relating to each of the periods.
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Most companies can't open prior months books because financials are already distributed to intended parties. What we would do is to reclass out of CSG and into a suspense account. In the month the credit is received back is when we would offset the suspense account.
Nov - Dr CSG Cr Bank
Dec - Dr AR Suspense account Cr CSG
Then say in Jan credit is applied by CC company - Dr Bank Cr AR Suspense.
For the posting in Dec make sure to use an asset suspense account because the initial hit is a debit and you wouldn't want a Dr amount in a liability suspense account.
Nov - Dr CSG Cr Bank
Dec - Dr AR Suspense account Cr CSG
Then say in Jan credit is applied by CC company - Dr Bank Cr AR Suspense.
For the posting in Dec make sure to use an asset suspense account because the initial hit is a debit and you wouldn't want a Dr amount in a liability suspense account.