Credit Card Accounting: The Best Ways To Track Expenses

As a business owner, you already know the importance of keeping track of your expenses and ensuring each credit card payment is accounted for. This is especially true when it comes to credit card expenses. If you don't track them properly, it can be difficult to accurately report your financial status and make sound business decisions. 

By keeping track of your expenditures and credit card purchases, you can ensure that your finances are in order, so you make sound business decisions. 

Additionally, tracking your expenses can help you identify spending patterns and areas where you can cut costs. That is why you should always strive to keep these expenses in order.

Best Ways to Track Business Expenses

There are a few different ways you do this, so let’s look at some ideas.

Use Software To Categorize Your Expenses

One of the best ways to track these expenses is to use software to categorize credit card transactions. This will allow you to quickly see how much you spend on different categories, such as travel, office supplies, or advertising.

There is a lot of credit card accounting software available, so you should be able to find one that meets your needs without much trouble.

Open a Business Bank Account

Another way to ensure every card purchase is accounted for is to open a dedicated business bank account. This will allow you to keep your personal and business finances separate, which can be helpful come tax time. 

Additionally, having dedicated accounts helps users keep track of their spending and better manage their cash flow.

Create Financial Statements  

A credit card statement will give you a clear picture of your income and monthly payments. This will let you see where your money is going and help you make informed decisions about your spending. 

You can create a credit card statement yourself or hire an accountant to manage your books and credit card statements.

Use a Dedicated Business Credit Card

One of the best available options here is to use dedicated business credit cards. This will give you an insight into how much you are spending on different categories, such as travel, office supplies, etc.

Also, using a dedicated business credit card can help build your credit history and improve your chances of getting approved for loans in the future.

​​Digitize Your Receipts

Digitizing your receipts will allow you to track all your credit card purchases even if you lose your paper receipts. 

There are several different ways you can digitize your receipts. For example, you can scan them or take pictures of them with your smartphone.

Review Your Expenses Regularly

No matter which method you use, it is crucial that you review them regularly. This will allow you to catch any errors or discrepancies and ensure you are staying on budget. Additionally, reviewing your expenses can help you identify areas where you can cut costs.

​​How To Record Credit Card Payments in Accounting

When you use a credit card to purchase goods for your business, that purchase is recorded as a liability. That is because you will eventually need to pay back the credit card company. Whatever you owe is registered as a current liability on your balance sheet.  

When you make a payment on your credit card, it is applied to the credit card liability account and removed from your balance sheet. 

To record your credit card payments in accounting, you must create a journal entry in which you will need to debit the cash account and credit the liability account. 

The amount of the debit should equal the amount of the credit. For example, if you made a payment of $500 on your business credit card, you would debit the cash account for $500 and credit the credit card liability account for $500. 

By following these steps, you can ensure that your business credit card expenses are being properly tracked and accounted for. For more information on credit card accounting principles or journal entries, you can consult with a certified accountant.