Expenses, credit cards, reimbursements and petty cash
You'll record spending by card and cash, pay back employees and owners for business costs, keep a petty cash fund and pay down the credit card.
- Principles:
- Business entity
- Matching
Card charges
A business credit card is a liability. Each charge raises an expense and what you owe the card company. Paying the card later isn't an expense: it moves money from the bank to the card account.
| Account | Debit (Dr) | Credit (Cr) |
|---|---|---|
| Business Credit Card | $1,742.00 | |
| Business Checking | $1,742.00 | |
| Total Balanced | $1,742.00 | $1,742.00 |
Are you Increasing or Decreasing?
| Debit | Credit |
|---|---|
| Liability | Asset |
| Equity | Draw |
| Revenue | Expense |
− To decrease an account, put it on the opposite side.
Business Credit Card goes down: press − and find Liability on the debit side.
(opens the full-size screenshot)Reimbursing an employee
When Tanya buys $64 of fuel with her own card for a company truck, the business owes her. Record the expense with the receipt and pay her back. A reimbursement under an accountable plan, with receipts, isn't wages, so it isn't taxed.
Pay it with a check, or add it to her paycheck as a non-taxable reimbursement.
| Account | Debit (Dr) | Credit (Cr) |
|---|---|---|
| Fuel | $64.00 | |
| Business Checking | $64.00 | |
| Total Balanced | $64.00 | $64.00 |
Are you Increasing or Decreasing?
| Debit | Credit |
|---|---|
| Liability | Asset |
| Equity | Draw |
| Revenue | Expense |
− To decrease an account, put it on the opposite side.
Business Checking goes down: press − and find Asset on the credit side.
When the owner pays a business cost
If the owner pays a business bill from a personal account and the business doesn't pay it back, it's a contribution to equity, not income.
| Account | Debit (Dr) | Credit (Cr) |
|---|---|---|
| Software & Subscriptions | $39.00 | |
| Owner's Investment | $39.00 | |
| Total Balanced | $39.00 | $39.00 |
Are you Increasing or Decreasing?
| Debit | Credit |
|---|---|
| Asset | Liability |
| Draw | Equity |
| Expense | Revenue |
+ To increase an account, put it on its normal side.
Software & Subscriptions goes up: press + and find Expense on the debit side.
Petty cash
A petty cash fund is a small amount of cash kept for small purchases, with a receipt for everything spent. You replenish it by writing a check for exactly what was spent, recording each expense. The fund itself stays the same size.
Cash in the box + Receipts = The fund amount
| Account | Debit (Dr) | Credit (Cr) |
|---|---|---|
| Office Supplies | $50.00 | |
| Business Checking | $50.00 | |
| Total Balanced | $50.00 | $50.00 |
Are you Increasing or Decreasing?
| Debit | Credit |
|---|---|
| Liability | Asset |
| Equity | Draw |
| Revenue | Expense |
− To decrease an account, put it on the opposite side.
Business Checking goes down: press − and find Asset on the credit side.
Recurring expenses
Some costs come out of the bank automatically every month, like phone service or software. Set up a recurring expense so it posts on schedule, or a bank rule so the line is categorized the same way each time.
Try it in Leah Books
- Go to Banking > Receipts and upload a receipt photo. Check the vendor, date, total and category, then record it.
- Go to Banking > Bank transactions and look for a credit card line. See which account it posts to.
- Go to Banking > Recurring expenses and look at how a monthly charge is set up.
- Go to Accountant > Manual journals and write the entry to replenish a $50 petty cash fund.
Key terms
- Credit card payable
- What the business owes on its card. A liability.
- Reimbursement
- Paying someone back for a business cost they paid personally.
- Accountable plan
- A reimbursement policy with receipts that keeps reimbursements tax-free.
- Petty cash
- A small cash fund for small purchases, kept at a fixed amount.
- Replenish
- Refill petty cash by the amount spent, recording each expense.
Check what you learned
Pick an answer to see if it's right and why. Nothing is saved or sent.