Journal Entry for Expenses Paid through Credit Card

Journal Entry for Expenses Paid through Credit Card

In this article we would discuss the journal entry for expenses paid through credit card. Expense is debited being increase in expense, while credit card is credited being liability as credit card issuing bank is making payment on your behalf, which is actually your liability.

Date	Particular	Ledger Folio	Dr.	Cr.
01-01-2017	Expenses		xxx
01-01-2017	Credit Card Payable			xxx

The rules of recording expenses and liabilities would be applicable to record the credit card transactions.

There are two rules for recording the journal entry for expenses

·         Increase in expense is Debit.

·         Decrease in expense is Credit.

Similarly there are also two rules for recording the journal entry for liability.

·         Increase in liability is Credit.

·         Decrease in Liability is Debit.

Examples of Journal Entry for Expenses Paid Through Credit Card

1.    Stationary item of PKR 1,600 purchased through credit card.

2.    Repair charges of PKR 2,800 paid though credit card.

Stationary shall be debited as expense increased and credit card payable shall be credit as increase in liability. The journal entry is shown below;

Date	Particular	Ledger Folio	Dr.	Cr.
31-12-2016	Stationary		1,600
31-12-2016	Credit Card Liability			1,600

Repair expense shall be debit and credit card liability shall be credit. Journal entry is given below

Date	Particular	Ledger Folio	Dr.	Cr.
31-12-2016	Repair		2,800
31-12-2016	Credit Card Liability			2,800

There is another important journal entry for payment of credit card bill generated by the credit card issuing bank for purchases made through credit card. The payment of credit card bill shall be recorded as under;

The credit card liability shall be debited as decrease in liability and cash or bank account shall be credited as decrease in the asset.

Date	Particular	Ledger Folio	Dr.	Cr.
31-12-2016	Credit Card Liability		2,800
31-12-2016	Bank/Cash			2,800