Expense Account Balancing

HPY Philly · ‎June 17, 2024

Hello all,

I've been digging through the help topics and community archive for a while now and can't seem to find my exact question, so it's either the most basic obvious accounting method that I'm too new to understand, or it's right in front of me and I'm just not seeing it.

I'm trying to figure out how I balance our expense accounts; we're in our 3rd month of operation and I've been tracking everything on QBO. Every penny we spend or earn is accounted for accurately, however, we have expense accounts that are entirely out of balance, so I'm trying to understand how to rectify that. For the most part, every expense of ours has gone on a zero interest credit card, up front costs being the bulk of it, which we have been paying down in chunks as our revenue began climbing. Every expense goes on the business credit card account, as well as the identified category expense account (e.g. Furniture & Fixtures, Leasehold Improvements, etc.). The increasing credit card balance is paid down in the aforementioned chunks as debits from our business bank account, however, those chunks are not paid towards specific line items, thus the pay down of the credit card does not directly "pay down" the categorized expense accounts. So while the credit card account balance is slowly whittled down, the categorized expense account balances continue to accrue without any debits applied over time. Do I need to make journal entries for debits to each individual line item of those expense accounts, and if so, how do I input an account to credit in said journal entry without throwing off the existing balance of those accounts?

A follow up question to that pertains to the Insurance Payable account; I pay our GL insurance with our business credit card, so again, these expenses are paid in regular chunks without specifying line items. I was able to figure out that I should produce a bill for the insurance specifically and then "pay" that bill, so our Accounts Payable is properly tracking those expenses, but the Insurance Payable categorized account has a negative balance that just keeps growing. Similar fix to the question above?

Thank you for your help,

William

AdonL · ‎June 17, 2024

Hello there, Philly. I'm here to provide details on handling credit card expenses in QuickBooks Online.

In QuickBooks Online (QBO) normal recording, we don't balance the expense accounts or reduce the amount since they are just used in transactions. You don't have to do anything since you've recorded the entries using those accounts (Furniture & Fixtures, Leasehold Improvements) correctly.

Moreover, you don't have to alter the amount unless these expense accounts are for depreciating assets since QuickBooks Online doesn't automatically depreciate fixed assets. You can manually track depreciation using journal entries.

Please note that calculating asset depreciation is a strenuous process. We recommend working with them regarding this topic. They know the best methods. If you don't have one, you can use our Find-an-Accountant tool to look for an expert near you. Also, you don't need an Insurance Payable liability account, you'll have to enter the bill from your insurance provider and then pay it.

Learn more about recording depreciation in QuickBooks through this article: Depreciate assets in QuickBooks Online.

Finally, you can check out this article about recording payments you make to your credit cards in QuickBooks Online: Record your payments to credit cards.

Feel free to let me know if you need further assistance with reconciling your credit card transactions. I've got your back.

Rainflurry · ‎June 17, 2024

@HPY Philly

Ignore the response from @AdonL . They have no understanding of double-entry accounting.

When you charge expenses or fixed assets to your credit card, as long as you accurately list the expense/fixed asset account on the expense/bill, there's nothing else you need to do with the expense/fixed asset account. You recorded the expense or fixed asset cost - done. When you enter a bill, you increase the account you choose under 'Category' as well as A/P (if bill) or the cc liability account (if you choose the cc under 'Payment account' on an expense transaction). Then, when you make a cc payment, that reduces the cc liability balance as well as your bank account from which the payment was made. There's no balancing of expense/fixed asset accounts, you don't want to reduce them except for depreciating fixed assets but's that's done with Depreciation Expense and contra-asset account called 'Accumulated Depreciation' and generally by your CPA.

You don't need an Insurance Payable liability account, just enter the bill from your insurance provider and then pay it.

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