Navigation:  Chart of Accounts > Setting up credit cards

A credit card belonging to a business or used exclusively for business (such as a personal credit card of a sole trader/proprietor) can be set up in two basic ways in MYBOS. The options are:

 

 

The two approaches are financially equivalent, so both are equally correct. This choice is a matter of personal preference.

Creating a credit card account

 

Regardless of which option will be used, the credit card account must be created first under the Cash Accounts tab. A credit card account is considered a cash account because it can be used as a medium of exchange, even though actual currency is not involved.

 

Enable the Cash Accounts tab and create the credit card accounte. You may wish to add custom fields to your cash accounts to record things like account numbers and financial institutions. You can also assign account code numbers to control the order in which accounts are displayed or match them to an overall numbering scheme for your chart of accounts.

 

Contra asset option

 

To set up the credit card as a contra asset account, leave the control account field at the default option of Cash & cash equivalents when you create it:

 

 

Be sure to check the box indicating the account is maintained by a financial institution:

 

 

The credit card will now be displayed in your Cash Accounts tab along with other cash accounts. Because most transactions will post to this account from Spend Money operations, the account's balance will usually be negative. Only refunds or payments to the credit card will move its balance in a positive direction.

 

 

On your Balance Sheet, the balance of the credit card account will reduce the balance of the control account, Cash & cash equivalents:

 

 

 

The advantage of the contra asset option is that your Summary page and Balance Sheet show you at a glance how much cash you have to spend that is not already obligated. The disadvantage is that credit card balances are not so visible.

 

Liability option

 

To set up the credit card as a liability account, you must first create a custom control account in your chart of accounts. Give it a name like Current liabilities if you want it to include other short-term obligations. Or just name it Credit cards. Indicate that the custom control account is made up of cash accounts.

 

 

Go back to the Cash Accounts tab and Edit your credit card account by assigning it to the custom control account just created:

 

 

Now, the balance of your credit card account will show under Liabilities on your Balance Sheet:

 

 

Notice that while the credit card balance will still show in the Cash Accounts tab as negative, it will appear as a positive number under Liabilities on the Summary page, because Liabilities are automatically subtracted from Assets on that display.

 

The advantage of the liability option is that credit card balances show on your Summary page and Balance Sheet as amounts owed. This may be more useful if you do not always pay off the full credit card statement balance. This option clearly separates what you have (assets) from what you owe (liabilities). The disadvantage is that a quick glance at the Summary may suggest you have more un-obligated cash than you really do.