The system used by a small business owner to record credit card purchases is a measure of whether the entrepreneur is efficiently tracking expenditures or living under a pile of unfiled receipts. A credit card dedicated solely to business use is the definitive solution, and a reason why the more efficient tracker is successful.

You can establish a credit card account for your business with accounting software. Charges are recorded like checks drawn on a bank account; each charge entry automatically creates a liability on the company balance sheet for credit card payable. This credit card liability is therefore owed by the business. Note: be sure to categorize personal expenditures on the card as “owner distributions.”

You can reduce the incidence of errors by assuring that payment of the credit card bill applies to the liability account. Simply writing a check for an expense category called “credit card payments” is incorrect. The expenses are already recorded when each credit card charge is entered. Enter all credit card charges so the sum appears in the balance sheet liability account for credit card payable. Then apply payments sent to the credit card issuer to that liability account.

If you use a credit card for some business purchases but mainly for personal expenses, don’t create a credit card liability account for the business. Instead, have the business reimburse you and record the expense categories being reimbursed as if the company had paid them directly. Then pay the credit card bill with personal funds. And come out from under those piled-up receipts.

Source: Gold Gerstein Group

Article by Black Car News

Black Car News provides breaking news, editorial, and information to drivers, owners, and other key players in the New York City for-hire vehicle industry.

See All Articles