Credit Card Liability
Definition
A business credit card is a liability. When the card is used, the credit card balance increases. When the card is paid, the liability decreases. Paying the card does not create a new expense.
Example
The business buys $300 of office supplies on a credit card. Office Supplies Expense increases $300 and Credit Card Liability increases $300. Later, paying $300 to the card company reduces the liability — it does not create another expense.
Why It Matters
Confusing the payment with the expense is one of the most common bookkeeping errors. The expense happens when the card is used, not when the card is paid.