3

Suppose I pay with my credit card, £15 at a store, where £10 is for stationery used for my business meeting which is a claimable expense, and £5 is for my lunch which is a personal expense.

I think there are two ways to do this:

A. Use one journal entry:

1) Transaction Description: lunch and business stationery
   credit - £15 - Credit Card (Credit)
   debit  - £10 - Business Expense (Asset)
   debit  - £5  - Lunch (Expense)

B. Use two journal entry one for each purpose:

1) Transaction Description: business stationery 
   credit - £10 - Credit Card (Credit)
   debit  - £10 - Business Expense (Asset)

2) Transaction Description: lunch
   credit - £5  - Credit Card (Credit)
   debit  - £5  - Lunch (Expense)

My feeling is that (A) is more useful for tracking against the credit statement, where as (B) is more useful for understanding the purpose (due to a nice separation of transaction purposes).

Is there a recommended best practice in these circumstances?

NB: Please note that I am an novice accountant. I am learning accounting from a non-pro book, and from attempting to do my own personal and business account. Apologies if my thinking or terminology is incorrect.

3

Use one journal entry, and split the expenses into the appropriate accounts. This can happen even if you never mix business and personal on the same receipt: say you order office supplies (which where I live are immediately deductible as an expense) and software or hardware (which must be depreciated because they are assets) on the same order.

We have an account called Proprietors Loan which represents money the company is lending to the humans who own it, or that the humans are lending to the company. Were I to pay for my personal lunch on a business credit card, it would go through that account, increasing the amount the company has lent me or decreasing the amount I have lent it. Similarly if I made a business purchase with a personal card it would go through that account in the other direction. Where I live, I can lend my company all the money I want any time, but if the company lends me money there can't be an outstanding balance over the corporate year end.

If you make two credit card entries of 5 and 10 when you go to reconcile your accounts it will be harder because you'll have to realize they together match the single 15 line on your statement. Making a single entry (your A option) will make reconciling your statement much easier. And that way, you'll probably reconcile your statements, which is vital to knowing you actually recorded everything.

1

A.1 and B.1 are properly balanced, but "Business Expense" is an expense, not an asset.

The T entries should be timestamped. The time should be equal to the time on the credit card receipts. This will make audit and balancing easier.

A or B can be used, but if the the business is to be reimbursed for personal expenses, the accounts should be renamed to reflect that fact.

More explicit account names could be "Business expense - stationary" and "Personal expense - lunch" or even better "Personal expense - cammil - lunch". With a consistent format, the account names can be computer parsed for higher resolution and organization, but when tallying these high resolution accounts, debits & credits should always be used.

When it comes time to collect from employees, only accounts with "Personal expense" need be referenced. When it comes time to collect from "cammil", only net accounts of "Personal expense - cammil" need be referenced.

An example of higher resolution, to determine what "cammil" owes, would be to copy the main books, reverse any account beginning with "Personal expense - cammil", and then take the balance. Using the entries in the question as an example, here's the account to determine "cammil"'s balance:

debit - £5  - Personal expense - cammil - lunch
credit  - £5  - Personal expense - cammil

Now, after all such balancing entries are performed, the net credit "Personal expense - cammil" is what "cammil" owes to the business.

The scheme for account names should be from left to right, general to specific.

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