We have a credit card that has a large balance on it. Most of the balance came from, a transfer from an old credit card that the church had. This was done about 2 or 3 years ago and I don't have the transaction history. How do I set up the account in PCPLUS so that I can start tracking the credit card and associated expenses correctly?
I know that the credit card is a liability. If I show a beginning balance of say $10,000, wouldn't my balance sheet be off because I don't have any asset to offset it? Also what is the best way to account for the interest on the card?
BC
Setting Up a Credit Card
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If I understand that the credit card is from past accounting period uses, you would debit your fund balance account and credit a liability account. When you purchase items, you would debit the appropriate expenses and credit cash if you are paying for what you purchased or credit the liabiity account. If you are accruing interest, you would have to debit interest expense and credit the liability account. When you pay down the account, you would then debit the liability and credit cash.
Randy B
The easiest way to handle interest to me if you are carrying a balance is to debit interest expense and credit the liability when you receive your credit card. That way the balance in your liability account should equal what the credit card company says you owe them. Then you can make your payment. Your credit card company would specify how they compute interest in your agreement.
Randy B