Real Life Accounting Blog

Recording credit card purchases on your books can be confusing and messy if you don’t do it right. This is especially true if you mix personal and business expenses together. It makes no sense to simply record a payment to some account called Miscellaneous Expense or Credit Card Expense. The business and personal charges must be broken out separately and allocated into their appropriate categories. The credit card usually has a finance fee element to it each month. Technically, you should not be able to charge the full amount of that fee as an expense if you have personal use activity mixed in.

It is always best to use the card exclusively for business if you can. Each month when you receive your statement from the credit card company you should code or categorize each charge item on the statement. Include the finance charge to an account called Interest Expense or Credit Card Fees. Using your general journal you should record the activity. Here is an example:

Credit Card Payable is obviously a liability account on your balance sheet because you owe this money. If you were to make a payment on your credit card for $200, the transaction would look like this:

However, since a payment would most likely be coming out of your check register, you would not have to write a general journal entry. The category called Credit Card Payable would simply be coded next to the check and entered via a cash disbursements journal into your computer, or, automatically entered if you use computer checks.

The beauty of this simple method it that the Credit Card Payable account balance should always equal the balance on your credit card statement. In addition, all the charges get allocated into the proper categories in their correct amounts.