Setting Up Credit Cards

[hajian]

Since PC+ does not have a credit card account, what do others think about setting up a Credit Card account as a Bank Account (with a negative balance, of course). Has anyone tried this? I assume by doing so you could do a bank reconciliation on your credit card account when your monthly statement comes in.

[Randy B]

I am not sure what you mean be setting a credit card account as a negative balance. I though you have two options. One is to have a credit card account that is an expense account. Everytime you pay your bill you would debit that account and credit cash. The down side is you lose the detail of what you were paying for. It easy though. I think the better approach is to review the bill and code into the proper expense accounts what you are purchasing and then credit cash when you pay.

[hajian]

I though you have two options. One is to have a credit card account that is an expense account. Everytime you pay your bill you would debit that account and credit cash.

I've never thought of using an expense account for credit card. Wouldn't the related purchase be the expense? For example, if I were to buy flowers for someone on the church credit card, I would debit the "Gifts & Flowers" expense account and credit either a liability account or asset account.

In the past I've credited a liability account (meaning, I now owe more to the Credit Card company) - however, what I'm wondering is if it would not be better to credit an asset "checking" account because it would give me more ability to track items in the account. [if I did this, then my asset credit card account would show a negative figure because it would be a negative asset). Of course, I'm new to this, so I'm "assuming" a checking account would give me better tracking than a liability account. Am I wrong on this? I haven't been in PC+ long enough to do "bank reconciliations" yet. I want to be able to do a bank reconciliation on my credit card account. Can I do that if my credit card is a liability account?

[Randy B]

First, I think you need a credit card policy on what it will be used for and make sure who can use it. I think then the easiest thing to do is when people pruchase something and give you the receipt, just file it. When the bill from the credit card company comes, debit the expense for what you have bought with the receipts you have and credit cash.

[hajian]

That could work too. I suppose it is the easiest way to do it. Less paperwork too.

Thanks.