Accounting for Credit Cards

1

Hi, Having trouble working with credit cards, confused on what type of account, paying off, etc. etc.

I use Credit cards to purchase inventory, so I had put it as a cash account (bank account). Then read a post to
set up as a liability, but then didn’t know how to pay it and let it come off the liability.

2

How did you set it up as a liability account ?
Putting it as a Cash Account is the correct set up. To locate it as a Liability you need to create a custom control account then nominate the credit card account to that control account.

  1. Create the custom control account under Settings - Chart of Accounts - Balance Sheet

  1. Now edit your Cash Account - Credit Card and allocate the custom control account

  1. The balance sheet now looks like this

  1. Now use the Receive Money & Spend Money functions just like any other cash account
3 Likes
3

Thank you Brucanna, do I need to set it up as a liability account or can I just do the Cash account?

I was trying to do the liability account cause I believe I read it in a prior post about using credit cards as for paying for inventory

4

Follow @Brucanna’s instructions, which were quite complete. But perhaps you were confused because the control account and cash account were given the same name in the example.

You create a custom control account as a liability account. You create a credit card account as a cash account because that is the only type account from which you can spend, receive, or transfer money. When you create the credit card cash account, assign it to the custom control account you just created as a liability account. Otherwise, it will default to the Cash & cash equivalents asset account.

If you want to keep things simpler, you can leave out the custom control account, but then, your credit card transactions will show up as a contra asset account rather than as a liability.

5

Okay thanks Tut I will try it that way.