Business Invoice Paid By Personal Credit Card

Business Invoice Paid By Personal Credit Card

Business Invoice Paid By Personal Credit Card

I use QuickBooks. My boss paid a vendor invoice with a personal credit card which is also paid from the same bank account as the vendors. How do I post this to QuickBooks?

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Jul 06, 2018
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starstarstarstarstar 		Persoal Credit Card Paid For Business Expense
by: Stephanie

Thank you for your question about how to record the payment of a business expense from a personal credit card in QuickBooks.

You can accomplish this by posting a journal entry. The journal entry should debit the expense account and credit Owners Contribution with a note in memo stating that it was paid from a personal account.

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Credit Card Charges Bookkeeping Question


(Cinti)

Credit Card

Credit Card

If I make a charge on my credit card in December 2021 but pay off the card with a check in January 2022, which tax year should the expense be deducted in, considering that I operate on a cash basis?

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Oct 10, 2023
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starstarstarstarstar 		Cash Basis Credit Card Accounting
by: BB

When you're operating on a cash basis for accounting, you record income and expenses when the cash actually changes hands. In your situation, you charged something to your credit card in December 2021, but you didn't actually pay off that charge until January 2022.

So, even though the charge was made in 2021, because you paid it in 2022, the deduction would typically go on your 2022 taxes. The key thing to remember for cash-basis accounting is that it's all about when the payment is made, not when the charge occurs.

Accounting can be counterintuitive sometimes, especially when you're juggling transactions that span across different years. But keeping a close eye on when payments are actually made can help you maintain accurate books and stay compliant with tax regulations. Trust me, understanding the basics of your chosen accounting method can save you from a lot of confusion when tax season rolls around.

So, do you feel clearer on how to handle expenses that span over different tax years?

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Credit Card Fees

Credit Card Fees

Credit Card Fees

Should Credit Card Merchant Fees be an expense, or put into Cost of Goods Sold account?

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Jul 06, 2018
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starstarstarstarstar 		Credit Card Merchant Fees
by: Stephanie

Thank you for your question about credit card merchant fees.

Depending upon the kind of business you have or the kind of expenses you are paying for with the credit card, you can record credit card merchant fees either as a Cost of Goods Sold expense or as a subcategory interest expense.

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Credit Card Transaction

I used a credit card to purchase goods but haven't received the invoice yet. It's month-end, and I need to close the books. I've made a journal entry to accrue the expense.

Is this the correct approach? How should I handle this situation, especially since it affects my credit card reconciliation, and I can't obtain the invoices?

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Oct 10, 2023
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starstarstarstarstar 		Outstanding Bookkeeping Item
by: BB

In accounting, timing is everything, especially when it comes to closing your books each month. Since you're using accrual accounting, you're on the right track by creating a journal entry to recognize the expense even if you haven't received the invoice. Your journal entry to debit the expense and credit an accrual account is appropriate.

However, you're correct that this approach complicates credit card reconciliation. Under normal circumstances, you'd reconcile the credit card account when the invoice is received and replace the accrual with the actual expense. But as you've mentioned that getting the invoice isn't possible, you have to work with the information you have.

Here's how I would suggest you handle it:

Keep the journal entry as it is (Debit Expense, Credit Accrual) to recognize the transaction.
When you reconcile your credit card, make note of this specific transaction as an outstanding item that is effectively "in transit."

Once the new month begins, you can reverse the accrual journal entry and create a new one based on your credit card statement, allowing your credit card account to reconcile properly.
This way, you satisfy the requirements of accrual accounting and can reconcile your credit card account when the statement comes in.

Does that clear up how you should proceed?

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Credit Cards

I am a new bookkeeper doing books for a new client that has not done any bookkeeping since she opened her business in April. This client received a business credit card and had it maxed out already. How is this entered into the business and what accounts do I use as it has to be paid off in payments?

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Oct 10, 2023
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starstarstarstarstar 		Bookkeeping For New Business
by: BB

Handling a new client with no prior bookkeeping can be challenging, but you're not alone; many bookkeepers find themselves in similar situations.

Recording the Business Credit Card

First off, you need to create an account in your accounting software to track the credit card. This is where you'll record all transactions made using that card.

Booking the Initial Credit Card Debt

Since the card is already maxed out, you'll also need to record this existing liability. You would typically:

Debit the Expense Accounts: Allocate the amounts to various expense accounts based on what was purchased using the credit card.

Credit the Credit Card Liability Account: The credit side would go to your newly created credit card liability account, effectively showing that you owe this money.

Handling Repayments

Since the card is being paid off in installments:

Debit the Credit Card Liability Account: This reduces the amount owed.

Credit the Bank or Cash Account: This reflects the payment going out.

Having an organized system for tracking payments will be crucial here. Consider setting reminders for due dates so that payments are made on time to avoid additional interest or penalties. With time, this debt can be managed and paid off, bringing your client closer to better financial health.

Are you feeling a bit more secure on how to handle this situation? A new client like this gives you the opportunity to truly make a difference in their business by setting them on the right financial path.

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Merchant Credit Card Fees

When I receive a credit card payment of, let's say, $100. But the merchant credit card company only deposits into my account $97.50 due to deducting $2.50 for their fees.

In QuickBooks I enter the income as $100 and make a deposit into my bank of $97.50. The $2.50 is money I possess but it is a liability to the merchant company until they deduct that amount at the end of the month from my bank account.

When I make the actual deposit in QuickBooks it does not allow me to hold back and put $2.50 in an Expense account. Only into a Liability account until it is paid. How can I book it in QuickBooks as an Expense?

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Oct 10, 2023
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starstarstarstarstar 		Split Deposit
by: Stephanie

Merchant fees are a standard part of doing business these days but can be tricky to record properly in your books. You're not alone—this is a common bookkeeping question.

In QuickBooks, you have the option to split the deposit to account for both the full payment and the merchant fee. Here's how you can handle this situation:

Record the Full Payment: Initially, record the $100 payment in your Accounts Receivable or Sales Income Account.

Make a Deposit: Go to the "Make Deposits" screen and select the $100 payment.

Split the Deposit: In the same deposit screen, you'll need to add another line.

Account: Choose your Expense Account where you record merchant fees.

Amount: Input -$2.50. (The negative sign indicates that this amount is being taken out of the deposit.)

Finalize the Deposit: Your deposit screen should now show that you're depositing $97.50 into your bank account, which matches with the real-world deposit from the credit card company.

Match with Bank Feed: Once the deposit comes through your bank feed, you can match it with the deposit you've entered, making reconciliation a breeze.

By doing it this way, you're accounting for the full $100 income, while also noting the $2.50 expense, so everything balances out. This keeps your income statements and balance sheets accurate, making it easier for you to keep track of your finances.

Is that clearer? Hope this helps you navigate the intricacies of recording merchant fees in QuickBooks.

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Posting Negotiated Credit Card Debt

by Linda
(Austin TX)

My client had several credit cards that she negotiated a debt settlement. After I post the the final payment, how do I write off the balance?

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