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Please help! Entering Credit Card Purchase

I need to enter my first company credit card purchase and discovered that I need to set up an account for the credit card. I understand the entries as follows:

When I enter the liability to the credit card company for the purchases:

  1. Cr. Credit Card, Visa 0 Dr. Purchases 0

When I pay credit card liability

  1. Cr. Bank 0 Dr. Credit Card, Visa 0

My question is where is the proper place to set up the credit card account? Is it under current liabilities? And what is it called usually? Just Credit Card - Visa?

I am using an older accounting software so it doesn't automatically let you choose "pay by credit card", so I have to set this up myself.

Thanks for any advice.

Reply to
phuile
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"phuile" wrote

As a current liability.

Yes.

That'll work. If you have more than one card for the business, consider setting up one account for each.

You may find you'll have to do a lot more journal entries.

This account will need to be reconciled each month, same as you do for a bank account, to record all transactions in and out of the card balance.

You'll have to decide how much effort you want to put into accounting for the charges made. It may be easier to record the transactions from the bankcard statement instead of trying to post each purchase throughout the month. Invariably you'll miss purchases, if you carry a balance you'll have interest to record, etc and so on. If the financials are for your use only, you will probably have a pretty good idea what your charge card balance is at any given moment without having to rely on the number in the software.

Reply to
Paul Thomas, CPA

You are actually better to set up the VISA as a Credit Card. This will allow you to go to the Banking menu (centre or drop down) and enter Credit Card Charges like cheques and to use the Reconcile function the same way as the bank accounts.

You *can* change the VISA from Liability to Credit Card. But then you can't change it to anything else (but why would you?).

Stephanie

Reply to
S.M. Serba

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