Recording a chargeback and its fee in the books
The journal entries for a card chargeback, its dispute fee and the later win or loss, and how to keep the gateway clearing account and bank reconciled.
By Achekam · · 5 min read · For Running a business businesses in South Africa, Nigeria, Kenya
A chargeback creates an accounting puzzle that most bookkeepers meet only once or twice a year. The customer paid, the invoice was marked paid, and the money reached the gateway. Now some of that money has been taken back, a fee has been charged on top, and nobody will know for weeks whether it is coming back.
Left alone, the chargeback shows up as an unexplained shortfall: the gateway's payout is smaller than the payments it collected, the clearing account no longer clears, and the bank reconciliation has a gap. Recorded properly, it sits in its own account until the outcome is known, and the fee is visible as the cost it is.
The money goes the day the dispute opens
Stripe states that when a dispute is opened, the disputed amount plus a dispute fee is debited from the business's balance, and the disputed funds are held for the whole duration of the dispute. Stripe also says the business usually has 7-21 days to respond, the card issuer usually takes 60-75 days to decide, and the full process can take 2-3 months.
For your books, that means the cash has already gone before anyone knows who will win. You need somewhere to put it for those months.
The fee, and an amount that may not match the sale
Two details catch people out.
First, the fee is separate from the disputed amount, and it is a cost of doing business whatever the outcome. Record it as an expense when it is charged, not when the dispute closes.
Second, the disputed amount may not equal the original sale. Stripe explains that it can be lower or higher than the original charge, for example because exchange rates have moved, because a bank has combined several recurring charges into one dispute, or because the cardholder disputes only part of the purchase. Record the amount actually debited, and keep a note linking it to the invoice or invoices involved.
Where the debit shows up
How the chargeback reaches you depends on the provider:
- In the gateway payout. Where the provider takes the amount and fee from your balance, as Stripe describes, the next payout is smaller and the payout report should list the deduction.
- As a separate line. Some deductions may appear on their own in a statement or report from the provider.
Check your own provider's reports. Whichever form it takes, the starting point in Achekam is the gateway's clearing account. A verified gateway payment is recorded as a receipt against the invoice, debiting that gateway's clearing account and crediting trade receivables. Payouts from each gateway are recorded against that gateway's clearing account with its fees, by hand or from Paystack's and Flutterwave's own payout lists. A chargeback is one more deduction from that same clearing account.
The journals, step by step
Each business has its own chart of accounts, and accounts can be added. Before the first dispute, add two accounts: a current asset called something like "Card disputes pending", and an expense called "Card dispute fees". Then use manual journals. Achekam refuses an unbalanced journal or one dated in a closed month, and a posted journal is corrected only by a reversal, so the trail stays intact.
When the dispute opens
| Entry | Debit | Credit |
|---|---|---|
| Disputed amount taken | Card disputes pending | Gateway clearing account |
| Dispute fee charged | Card dispute fees (expense) | Gateway clearing account |
The invoice stays paid, which is still true: the customer did pay. What has changed is that the money is now held, and you have a claim to it.
If you win
| Entry | Debit | Credit |
|---|---|---|
| Funds returned by the provider | Gateway clearing account | Card disputes pending |
Whether the fee comes back as well depends on your provider's terms; record it only if it actually does.
If you lose
The disputed amount is gone. How to record the loss depends on why:
- The customer was right (goods not delivered, service cancelled): issue a credit note against the original invoice, which Achekam does from the invoice it corrects, in full or for chosen lines, with leftover credit held for the customer. Agree with your accountant how that credit is then cleared against Card disputes pending, so the money is not counted as owed to the customer twice.
- It was fraud, or you simply could not prove your case: charge the amount to an expense or loss account, crediting Card disputes pending.
How VAT applies to a lost dispute on a VAT-registered sale is a question for your accountant in South Africa, Nigeria or Kenya, because the answer depends on the reason and on local rules.
Stripe adds that while a dispute is open, a business cannot issue a refund outside the dispute process. Do not record a refund in the books for a sale that is under dispute; the dispute is the refund route.
Clearing account and bank reconciliation
The gateway clearing account is where errors show. In a month with no disputes, payments in, less fees and payouts, should leave nothing on it. In a month with a chargeback, the two dispute journals bring it back to nothing, while Card disputes pending holds the open amount.
At month-end:
- Check the gateway clearing account is clear, or that any balance is explained by payments not yet paid out.
- List the open items in Card disputes pending, each with its invoice and dispute reference.
- Reconcile the bank. In Achekam, bank lines are matched by suggestion and a person accepts each match; a line not yet in the books becomes a suggested journal a person approves, and a reconciliation completes only when nothing is left unexplained.
- Ask about any dispute open for longer than the provider's usual decision time.
For the timeline itself, see what happens when a customer disputes a card payment, and for the routine payout entries, gateway payouts and fees.
Source for the mechanics
Stripe's guide to how disputes work, including how funds and fees move describes each stage from the provider's side. Set up the two accounts before you need them, and agree with your accountant which loss account to use when a dispute is lost.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
