Using Personal Credit Card For Business Expenses

It’s always better to separate personal and business expenses as it simplifies the bookkeeping. However, if the owner of the business has paid business expenses using a personal credit card then they need to be recorded as expenses of the business in the accounting records.

If for example an owner pays business travel expenses of 150 using a personal credit card, then the amount would be debited to the travel expense account.

Journal Entry for Using Personal Credit Card For Business

The accounting records will show the following bookkeeping entries when a personal credit card is used for business.

Journal Entry for Using Personal Credit Card For Business
Account Debit Credit
Travel expense 150
Drawings Account 150
Total 150 150

Using Personal Credit Card For Business Bookkeeping Entries Explained

Debit
The debit represents the travel expense which is a cost to the business.

Credit
The owner has paid for the travel using their personal credit card. Until the amount is paid by the business it has an outstanding liability represented by the credit to the owners drawings account.

The Accounting Equation

The Accounting Equation, Assets = Liabilities + Owners Equity means that the total assets of the business are always equal to the total liabilities plus equity of the business. This is true at any time and applies to each transaction. For this transaction the Accounting equation is shown in the following table.

Using Personal Credit Card For Business and the Accounting Equation
Assets = Liabilities + Owners Equity
None = None + -Expense + Drawings
0 = 0 + -150 + 150

In this case the travel expense has reduced net income, retained earnings and the equity of the business. This has been matched by the credit to the drawings account increasing the owners equity in the business.

The drawings account is a temporary account and is cleared at the end of each year. In this case the account is cleared either by a credit against the capital account, or repayment to the owner depending on the circumstances.

Popular mdct.ru Examples

The personal expenses journal entry is one of many accounting journals, discover another mdct.ru example at the links below:

Using Personal Credit Card For Business Expenses November 6th, 2016Team

You May Also Like


Related pages


accrued expense accountingjournal entry for tax payablecapital lease exampleturnover calculatorfind the future value of an annuitygross profit margin vs markupcalculation of accrued interest on fixed depositjournal entry unrealized gainsegregation of duties accounts receivablecontra expenseaccount payable turnover days formulawhen using a perpetual inventory systemcash book entry exampleaccounting for rental depositsthe profitability indexdefine deferred income taxpresent value of increasing annuitybasic bookkeeping test questionsexamples of owners equitydefine bills receivablelifo reserve formulaaccounting verifiabilitybookkeeping stepsdefine the accounting cycledebtors balance sheetexample of manufacturing overheadthree column cashbookdeferred invoicejournalizing entriesexamples of general ledger entriesbank reconciliation statement problemsdepreciation excelexcel calculate marginefficiency ratio inventory turnover formulacalculate markup from marginpresent value of an annuity in excelreceive cash on account journal entryunadjusted trial balance sheethow to calculate work in process inventory endingpresent value of a lump sum calculatorpresent value of perpetual annuityadjusting entries for suppliesdouble decline depreciationfixed asset ratio formulacash flows in excelfuture value annuity duehow to calculate asset turnover ratiorule of 78 refund calculatoractivity based costing formuladepreciation templateallowance for loan losses journal entriesaccounts receivable turnover equationaccrued service revenue adjusting entryexamples of retained earningsgeneral ledger sampleannuity calculation formulaexplain fifo methodjournal entries for bad debtscalculate activity based costing exampleoutstanding loan calculatortemplate for bookkeeping small businessfuture value ordinary annuity calculatorhow to calculate bad debt provisioncontinuous interest rate calculatoraccounts payable ledgerformula for turnover ratiovalue of perpetual bondcalculating vacation accrualeffective yield method amortizationdebtors allowance journalexcel pv calculationhow to calculate accounts receivableunearned interest income journal entrywith recourse factoringperpetual and periodic inventory systems examplesformula for total asset turnover ratioexamples of revenue and capital expenditurepv of a perpetuitycalculate the variable cost per unitsales discounts income statement