Bookkeeping

What can be the best way to record business expenses paid by personal Credit card by LLC Owner?

I have one client who often pays his business expenses through his personal credit card, so I would like to confirm what is the acceptable treatment as per IRS as currently, I am recording it through a journal by debiting the relevant expense account and crediting his investment. Please confirm the said treatment is correct? Or do I need to change it?

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  1. 74 Answers

    Good morning, the method you are currently using is the correct method. Creating a journal entry to debit the corresponding expense account and credit owners’ equity is correct. If you find also that your client is using this card ONLY for the business expense you can connect the card to Quickbooks and accept the transactions. There are times when owners have not established enough business credit so they are using personal credit cards exclusively for the business. In these cases I have found it easier (and you will have detailed transaction information) to set the cards up in Quickbooks like you would any other credit card or bank account.

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  2. 6 Answers

    If I connect that personal credit card to QBO then It will reflect as Liability in my books, right?
    Secondly, If I categorize all the expenses in their relevant COA, then what happens if my client pays the CC bill through his personal bank?
    Do I need to make an adjustment for this by debiting CC Lib and Crediting Owner’s Investment / Equity Account?

  3. 74 Answers

    Yes if connect the account in QBO the account will be a liability in the books. If the client pays the CC bill through his personal bank account you will accept his CC payment and code it to Owners Equity. When you accept the CC transaction it will automatically DR the credit card liability and CR owner equity.

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