in accounting, how do you show a business credit card payment with a business checking account?

credit card payment
Jennifer K asked:


I want to show a payment from business checking to my business credit card – should it be a transfer of funds?

http://1mortgagecalculator.info

One Response to in accounting, how do you show a business credit card payment with a business checking account?

  1. Brock
    January 4, 2010 at 12:39 pm

    Well whenever you made a purchase on the credit card you should debit the appropriate account for which the purchase was made, and credit accounts payable, which is a liability account as the money will need to be paid back to the credit card company. Even set up a an account called “Accounts Payable – Credit Card” to see exact what’s going on the card.

    Then when you make the payment with a checking account, which is equivalent to cash, you would debit accounts payable – credit card, and credit your cash account. For example:

    You buy $100 worth of Inventory
    Dr Inventory 100
    Cr Accounts payable – credit card

    Then, you pay $50 for phone bill for last month
    Dr Utilities expense 50
    Cr Accounts payable – credit card 50

    Now it’s the end of the month an you write and mail a cheque to your credit card company for the full amount owing
    Cr Accounts payable – credit card 150
    Dr Cash 150

    That’s it. In order to stay in compliance with GAAP or IFRS, unless the purchase is immaterial, you need to make sure every time you make a purchase on the card it is put into the right account, not just some account like “Credit card purchases”.

Leave a Reply