How to deal with a credit card and the monthly automatic deduction

All,

I’ve read the topic ‘Credit cards tracking wish’ but I’m still uncertain how to deal with it. To technical for me and no step-by-step guidance.

For clarification, I pay and receive with my credit card for personal and business expenses. Every month this amount of money automatically deducts from my bank account. So what I see in my bank statement is a deduction from my credit card. Of course the total amount. I have to split this into 1) personal expenses and 2) business expenses, but how exactly? Please provide me with step-by-step instructions.

Just a thought by reading lots of topics…but could it be easily done by editing the ‘Receipts & Payments’ for the credit card. So editing the specific monthly deduction of the credit card and add it to the corresponding account(s). Isn’t that the only thing that needs to be done correctly?
If so, I still got my problem with the personal expenses :wink:

Thanks & Cheers,
Canefield

@canefield, you were reading a 4-year old topic, most of which is completely obsolete. I’ve closed it.

Your situation is not clear. You mention both paying and receiving with a credit card for both personal and business expenses. Is the card a business card you sometimes use for personal expenses? Or is it a personal card you use to pay business expenses? That affects the answer and whether you need to use expense claims.

You mention deductions from both your bank statement and your credit card. Are there really deductions from what you owe on the card? (Those would be receipts.) Or did you confuse terminology?

One thing is totally obvious. You should not be recording personal expenses in your business records. There are some situations where payment of personal expenses with a business credit card would be a drawing from a capital or owner’s equity account, but they would never end up in an expense account.

So, please explain your situation in more detail.

This is quite simple, firstly it doesn’t matter that the credit card is used for both personal & business. I am assuming that you have set up the credit card under the Bank Account tab.

Step 1 - when entering the credit card transactions (debit or credit but not the bank payment) then the account allocation would be decided at that time. For business transactions they would generally be allocated to a P&L account. However, there could be occasions when you need to use a BS account, such as purchasing inventory or fixed assets. For private transactions they would generally be allocated to one account, either under equity or liabilities depending on your organisation’s legal structure.

Step 2 - The bank payment of the credit card balance is a single inter-account transfer. There is no need to divide this payment between private and business proportions.

Step 3 - If you plan to reimburse the business for the private transactions - then you would do a New Receipt.

If you need further clarification for a particular transaction, provide the details.

@Tut, @Brucanna,

First of all my apologies for this late response.
I’ll try to explain in detail:

  • About the uncertainty regarding to paying and receiving with the credit card:

    With the only credit card I have, I pay for both private and business purchases.

    So yes, every now and then this credit card is used for private purposes.

    The credit card is registered on my private name, though the credit card is linked to my business account.

    When I receive -for whatever reason- a credit note from my supplier (business related) I have besides the credit (invoice) a debit (credit note) as well.

  • About the uncertainty regarding to deduction from the bank:

    Every month I receive a statement from the issuer of the credit card, with an overview of all purchases/transaction. The total amount will be deducted automatically from my business account.

    Of course I receive separate invoices from suppliers (business related) with the remark it is paid by credit card.

So how to record this properly? Should I use or not use the credit card as ‘bank account’? How do I make the distinction between private and business the right way?

New to this matter, how do I deal with the so called ‘In-Store Credit’?
What I can tell you here, is that the money isn’t refunded to the business account nor the credit card, but stays in the shops ‘In-Store Credit’. When I make additional payments in that particular store, it always write it off first from that ‘In-Store Credit’. But should a record this into my bookkeeping? I’d say yes, but how?

Possibly I’ve asked this before, but how do I book business expenses/payments that have been paid privately?

Thanks & Cheers,
Canefield

@canefield, you have raised many topics in this thread. In the future, you will get better answers if you confine your posts to one subject. So here are my thoughts on your various subjects:

  • Since the credit card is linked to your business bank account, it should be set up in Manager as a bank account. If you have not, read https://www.manager.io/guides/7035.
  • When you occasionally use the credit card for personal expenses, allocate these to an equity account. As @Brucanna wrote in November 2019, your business organization will dictate the nature of the equity accounting. The point is that payment of a personal expense from a business account is a withdrawal of capital.
  • Registration of the credit card makes no difference for accounting purposes.
  • You have the credits and debits reversed in your discussion of a credit note. A credit note from your supplier is generated from the supplier’s perspective. What is a credit to them is a debit to you. So the credit note must be entered into Manager as a debit note. Debit notes do not require or permit designation of a bank account (or credit card), because they do not involve the movement of money. They are posted against supplier subaccounts of Accounts payable, where they reduce the amount you owe the supplier. They do not affect any bank account balance. See https://www.manager.io/guides/7426.
  • The automatic payoff of the credit card balance from your regular bank account is an inter account transfer in Manager. No money has left the business. You have simply used an asset (cash in your bank account) to offset the liability or contra asset of the credit card balance. From an accounting point of view, the money left the business when you made the purchase from the supplier. The source of that money was initially the credit card. Now you are transferring that source to your regular bank account.
  • When the credit card is automatically paid off, you do not need to worry about separating personal and business expenses. That separation occurred when you entered the personal purchase and posted it to an equity account. As stated above, the payoff of the card balance is just as inter account transfer.
  • On your final question, business expenses that are paid with private funds should be entered as expense claims. See https://www.manager.io/guides/6898.