In light of recent discussions which I do/did not intend to derail, I thought I would come out and post an example as a separate question.
In this scenario I am talking specifically about credit cards and this may differ to loans (we’ll get there later, I promise)…
This is currently how I deal with my credit card*.
- I use the credit card, it is an expense, usually through the purchase invoice and make payment route
- I make a credit card payment, it is an inter-bank transfer from one account to another
- When interest is charged to the account, I create a payment and charge it to a “bank – interest charged” expense account
I could never begin to run a spreadsheet and calculate daily interest on an account purely because I think that is overkill and error prone. Especially when the financial institution provides that interest on the statement.
Looking only at credit cards and similar cash accounts (at this time):
- is this how other people do it?
- Is there a better way?
* I say currently because I am always open to suggestion and as with most things manager, it has very much been a learning experience and I am not an accountant/bookkeeper, meaning, I have had to apply processes based on my own logical, which I accept may not always be logical)