Question

Recording business cell phone purchase under cell phone company promotion

Forum|Forum|10 months ago
September 9, 2025
2 replies
48 views

I do the books for a small single person LLC company. She traded in her business cell phone for a new one through a promotional payment plan. The new phone cost $729.99. The cell phone company gives her a $15.28 promotional credit each month as payment toward her phone so she is only paying $5 toward the new phone each month.

I am struggling with how to record the new phone because she is liable for the full amount at any point before she pays it off. So I would think it would get recorded at the full $729.99 liability that is reducing each month even though she will have only pay a total of $180 for this phone at the end of 36 months. Maybe that is my first mistake and the phone liability should be recorded at the $180.

She pays for the monthly phone bill on her business credit card, so a portion of the bill goes toward her phone bill expense and a portion goes to pay down the liability. The problem is, I cannot figure out a way to reduce the portion being paid for by the phone company as that would create an incorrect credit card bill amount so the credit card bill would not reconcile each month. I could enter a journal entry to reduce the $15.28 monthly the phone company is reducing her liability, but I cannot figure out what the other side of that transaction would be.

I hope someone can help. Thanks!

QuickBooks Desktop

Tori B

QuickBooks Team

Thanks for taking the time to reach out to the QuickBooks Community, @MooToYou.

I hope you're having a wonderful day so far.

For this one, I recommend consulting with your accounting professional. Your accountant can advise the best way to record the cell phone purchase based on your business needs.

If you don't have an accountant, don't sweat it. You can find one here in our Resource Center.

Please don't hesitate to let me know if there is anything else I can assist you with. Take care!

M

MooToYouAuthor

What a disappointing response. I thought this was a community forum to bounce ideas. I guess I have posted in the wrong place. I understand I am not going to get a concrete answer but thought I might get some ideas to further research.

Rainflurry

Level 11

@MooToYou

There are a couple of ways this can be handled. I wouldn't record the phone as an asset with an offsetting liability because then you need to depreciate the portion of the phone recorded as an asset. That's far too complicated for this minimal cost.

1) By far the easiest is to record BOTH the $5 cost to pay off the phone and the monthly service as a single phone expense. Now, you may say "But, the phone is an asset with an offsetting liability." That's true, but the IRS doesn't require taxpayers to capitalize (record as an asset) any business equipment that costs less than $2,500 and the phone certainly qualifies.

2) You can expense the $180 immediately (well below the $2,500 de minimis threshold) and then record just the cost of the monthly service as an expense each month. That allows your client to fully deduct the cost of the phone upfront and expense the service as it's incurred.

In the event your client cancels the phone and needs to pay off the balance, you can record that as an expense.

To answer your question regarding the $15.28 monthly promotional credit, the entry would be a debit to the liability and a credit to other income. But, don't do that. Again, that's far too complicated for this minimal cost. This is a perfect example of what the $2,500 IRS de minimis threshold is designed for. It's an administrative convenience for these low-cost items.

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