@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.
