Credit card expenses

Hi Herb, thanks for the answer but I still don't understand how I can get my balance sheet to balance if I don't have account payable. Say I have $100 expense charged to my credit card on Dec 30,

2006. So I include this expense for 2006 which would reduce our P/L, which in turn reduces retained earnings, which in turn reduces our capital account. So I need a corresponding entry to make our Balance Sheet balance. Since we don't pay this expense until Jan 07, as of Dec 31 2006, our cash balance doesn't yet reflect this expense. So, we balance our book by having a liability account. Is my logic incorrect?

Regards, Uly

Not at all.

However, you speak of filing a 1065 which is a partnership return, meaning two or more partners. First, does the partnership have a separate credit card in just it's name? I doubt it. Which leaves you as a partner having the expense charged to your card. The partnership therefore owe you personally for what was charged. It's bookkeeping entry is a debit to expense(s) and a credit to your capital account. Similarly if your partner also used his card. Or you could treat it as a short term partner loan, and therefore as a payable if to be paid within a short time. ChEAr$, Harlan Lunsford, EA n LA

Thank you so much for your replies. Just to clarify, this is a partnership between me and my wife. The credit cards used for business are personal credit cards. However, I normally segregate the business portion and pay it directly from the business account. I suppose I could make the credit goes to the partners' capital accounts, however I have been crediting the cash account directly.

If I were to do this, this short-term loan would fall under liabilities in my balance sheet, right? My question is whether it's okay to have such liabilities in our balance sheet (for tax-return purpose) given that we file under cash-accounting basis. Thank you again.

Sincerely, Uly

I can't tell you how to account for this since I operate as a C Corp and I'm also not a tax pro.

However my C Corp also operates on a cash basis and on the recommendation of my account stop using my corporate credit card a couple of days before the end of our tax year (Dec

31) and pay any outstanding balance on the cards on December

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