Without knowing credit card deeply, you can not understand the journal entries relating to credit card. So, first learn credit card, then it will easy for you to understand the credit card journal entries. Credit card is one of may way to pay in USA and European countries.
Now, it is also popular in India because your can get back your money if you see that service and product provider did not give the service and product to you. You can do this through bounce your credit card payment. Second, if you have no money in your saving account, still your pay for buying the product under your credit limit.
In simple words, credit card is the loan to you against your FD in the bank. But this loan is used only for buying the product or paying for services. So, we deal it like a loan in accounting.
1. When you get loan through credit card.
Bank Fund Under Credit Card Dr. ( It shows as asset in the balance sheet)
Credit Card Payable Cr. (It shows as liability in the balance sheet)
( Now, this fund is not deposit your saving bank account but you have the right on this fund. So, this fund is your asset. On credit side, same fund will be your liability.
2. When you Pay Annual Fees on Credit Card Facility
Credit Card Service Charges Dr.
Saving Bank Account Cr.
3. When You buy goods through credit card.
Purchase Account/ Expenses /Creditor Account Dr.
Bank Fund under credit card Account Cr.
{ If you buy the product through credit card}
4. When you Bounce any Credit Card Payment
Bank Fund under credit card Account Dr.
Purchase Account/ Expenses / Creditor Account Cr.
5. For paying the amount of credit card + Interest +
other Charges after getting its bill in next week.
Now, it is also popular in India because your can get back your money if you see that service and product provider did not give the service and product to you. You can do this through bounce your credit card payment. Second, if you have no money in your saving account, still your pay for buying the product under your credit limit.
In simple words, credit card is the loan to you against your FD in the bank. But this loan is used only for buying the product or paying for services. So, we deal it like a loan in accounting.
1. When you get loan through credit card.
Bank Fund Under Credit Card Dr. ( It shows as asset in the balance sheet)
Credit Card Payable Cr. (It shows as liability in the balance sheet)
( Now, this fund is not deposit your saving bank account but you have the right on this fund. So, this fund is your asset. On credit side, same fund will be your liability.
2. When you Pay Annual Fees on Credit Card Facility
Credit Card Service Charges Dr.
Saving Bank Account Cr.
3. When You buy goods through credit card.
Purchase Account/ Expenses /Creditor Account Dr.
Bank Fund under credit card Account Cr.
{ If you buy the product through credit card}
4. When you Bounce any Credit Card Payment
Bank Fund under credit card Account Dr.
Purchase Account/ Expenses / Creditor Account Cr.
5. For paying the amount of credit card + Interest +
other Charges after getting its bill in next week.
Credit Card Payable Account Dr.
Credit Card Interest + other Charges Account Dr.
Saving Bank Account Cr.
6. When Your Saving Account's money is less than credit card payment and you are taking cash after stopping your FD. At that time, you get money after deducting all credit card payable amount and charges
Cash Account ( Cash from FD) Dr.
Credit Card Payable ( Payments of credit card done on your behalf) Dr.
Fixed Deposit in Bank
Credit Card Interest + other Charges Account Dr.
Saving Bank Account Cr.
6. When Your Saving Account's money is less than credit card payment and you are taking cash after stopping your FD. At that time, you get money after deducting all credit card payable amount and charges
Cash Account ( Cash from FD) Dr.
Credit Card Payable ( Payments of credit card done on your behalf) Dr.
Fixed Deposit in Bank
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