Learn It
A business credit card is a liability account. When the business uses the card to buy something, it owes money to the credit card company. Each charge increases the card balance. Each payment decreases it.
This works just like the Accounts Payable concept: the expense is recorded when the purchase happens, not when the bill is paid. The difference is that a credit card is its own liability account, separate from Accounts Payable.
Here is the problem that trips up almost every new bookkeeper: the duplicate expense.
The Duplicate-Expense Problem
Here is a classic mistake. The company buys $300 of office supplies using a credit card. The bookkeeper records the expense correctly: Office Supplies Expense goes up by $300, and the Credit Card liability goes up by $300.
Later, the company pays $300 to the credit card company from its checking account. The bookkeeper sees $300 leave the bank and records another Office Supplies Expense. Now the books show $600 of supplies expense — but the business only bought $300 worth.
The fix is simple: paying a credit card is paying down a liability, not buying more supplies. The expense was already recorded. The payment only reduces the credit card balance and reduces cash.
See It
Let's follow a $300 office supplies purchase and the payment that follows.
1. Buy $300 of office supplies on the credit card
The expense is recorded now. The credit card balance goes up by $300.
| Account | Debit | Credit |
|---|---|---|
| Office Supplies Expense | 300 | — |
| Credit Card Payable | — | 300 |
2. Pay $300 to the credit card from checking
The card balance goes down. Cash goes down. No expense is recorded.
| Account | Debit | Credit |
|---|---|---|
| Credit Card Payable | 300 | — |
| Cash | — | 300 |
Notice: Office Supplies Expense does not appear in the payment entry. The expense was already recorded in step 1.
3. Interest charge of $18 on carried balance
If the business does not pay the full balance, the card company charges interest. That interest is an expense — it is the cost of borrowing.
| Account | Debit | Credit |
|---|---|---|
| Interest Expense | 18 | — |
| Credit Card Payable | — | 18 |
Do It
Build the credit card register below. For each event, choose the correct category and enter the amount in Charge or Credit/Payment. Watch out for the duplicate-expense trap when you get to the payment.
Do It — Credit Card Register and Payment
The credit card starts with a $0 balance. For each event, select the correct category and enter the amount in Charge (increases the card balance) or Credit/Payment (decreases the card balance). The running balance updates as you work.
Watch out: the credit card payment is not a new expense. Choose the category carefully.
| Date | Description | Category | Charge | Credit/Payment | Running Balance |
|---|---|---|---|---|---|
| Beginning Balance | $0 | ||||
| Apr 3 | Office supplies purchase at Staples | $ | $ | $0 | |
| Apr 10 | Equipment repair — mower service | $ | $ | $0 | |
| Apr 15 | Vendor refund — returned defective supplies | $ | $ | $0 | |
| Apr 20 | Payment from checking to credit card | $ | $ | $0 | |
| Apr 28 | Interest charge on carried balance | $ | $ | $0 | |
Prove It
Answer each question, then read the explanation. There's no score — this is just to help the ideas stick.
Question 1
A business buys $300 of office supplies on a credit card. Later, the business pays $300 to the credit card company from checking. What happens to the expense?
Question 2
What type of account is a business credit card balance?
Question 3
A $75 vendor refund is credited to the business credit card. What is the effect?
Ready for more than a short exercise?
This exercise isolates one skill — tracking credit card charges and payments. QBO Dojo practice clients let you apply multiple bookkeeping skills together across realistic business activity inside QuickBooks Online.
Explore QBO Dojo Practice ClientsKey Takeaways
- A business credit card is a liability — the business owes money to the card company.
- Charges increase the card balance; payments and refunds decrease it.
- The expense is recorded when the purchase is made — not when the card is paid.
- Paying a credit card reduces the liability and cash — it is not a new expense.
- Interest charges are an expense — they are the cost of carrying a balance.
- Vendor refunds reduce the card balance — they are not revenue.