The credit card balance
The Sample page shows how the credit card balance changes with each transaction in this expense form template.
This is different to how it works for a business bank account, where the balance would increase with a payment received and decrease for a purchase of something.
Money Received Decreases the Balance
If it is money received into the credit card account then the balance on the expense form template decreases.
For example, if your credit card balance is $1,040, and you make a payment against the credit card off your business bank account of $1,000, the credit card balance will go down to $40.
That is all that is left owing to the credit card company now. This is how it will show in this expense form template.
Money Spent Increases the Balance
If you buy something the credit card balance will increase.
For example, say your credit card balance is $1,195 and you pay for a top-up for your cell phone of $45, the credit card balance goes up to $1,290. This is how it will show in the expense form template.
On the expense form template, the credit card balance shows as a normal value if it is a balance you owe the credit card company (example $250.00), but it will show as a negative red value if you have paid too much on to your credit card (example -$50.00).
which report does the credit card balance go on?
The credit card balance is shown on the Balance Sheet under Liabilities in an account called Credit Card Balance Owing, because any balance on the credit card that is owed to a credit card company is like a loan from them.
All loans are a liability because it is money you owe to another business. In saying that, some bookkeepers will include the balance under the Assets section of a Balance Sheet as a negative balance, which is perfectly acceptable.
credit card limit
Some people make the mistake of thinking they must show
their credit card limit amount on
their reports but this is not the case.
The credit card limit has no effect on credit card
accounting and should not be included in the business financial records.
Only the amount that you spent that is owed to the credit
card company is what should be shown.
delays in processing time
It can often take up to 5 or more days for a transaction to be processed and cleared on your credit card.
Say you bought a laptop on 31 January for $800, if you use Internet Banking and check your credit card details, you will most likely find that even though the credit card balance has increased by $800 (and even that might take a few days to occur), when you look at the details on the credit card transaction page there may be no details yet - it might just say Electronic Transaction or something similar and not yet show the name of the business you bought the laptop from. It will show it once the amount clears.
So how should you handle this in your expense form template?
- If the amount of the purchase has been deducted off your credit card from the total balance on the date of purchase, then enter it into the expense form template on that date. This will keep your credit card balance accurate to the date.
- If the amount of the purchase has not yet been deducted from the total balance, then leave it off until the date that it does change the balance.
Your aim is to make sure that the expense form template balance matches the credit card account balance, so whether you access it through internet banking, or you wait for a paper statement to arrive, make sure the template matches it.
You can use the last column Headed R to mark each transaction as Reconciled as you check them off your Credit Card Statement. R stands for Reconciled, C stands for checked, X stands for checked and the dash can mean anything you want! Select any one that you fancy using.
what to do if your credit card statement ends in the middle of the month (not on the last day)
The expense form template for each month runs from the 1st of the month to the 31st (or 30th) of the month.
However, a lot of the time Credit Card Statements end with a closing balance on a 15th or something similar.
Still use all the actual dates of your transactions and simply mark as reconciled all the transactions up to the 15th of the month. All this means is that you have to wait a few weeks before seeing a finalized P&L figure for the previous month.