rivateuly[at]gmail.com wrote:

- quote -

I can't tell you how to account for this since I operate as
a C Corp and I'm also not a tax pro.

However my C Corp also operates on a cash basis and on the
recommendation of my account stop using my corporate credit
card a couple of days before the end of our tax year (Dec
31) and pay any outstanding balance on the cards on December
31.

--
Vic Roberts
Replace xxx with vdr in e-mail address.

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Thank you so much for your replies. Just to clarify, this
is a partnership between me and my wife. The credit cards
used for business are personal credit cards. However, I
normally segregate the business portion and pay it directly
from the business account. I suppose I could make the
credit goes to the partners' capital accounts, however I
have been crediting the cash account directly.

- quote -

If I were to do this, this short-term loan would fall under
liabilities in my balance sheet, right? My question is
whether it's okay to have such liabilities in our balance
sheet (for tax-return purpose) given that we file under
cash-accounting basis.

Thank you again.

Sincerely,
Uly

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- quote -

Not at all.

However, you speak of filing a 1065 which is a partnership
return, meaning two or more partners.

First, does the partnership have a separate credit card in
just it's name? I doubt it. Which leaves you as a partner
having the expense charged to your card.

The partnership therefore owe you personally for what was
charged. It's bookkeeping entry is a debit to expense(s)
and a credit to your capital account. Similarly if your
partner also used his card.

Or you could treat it as a short term partner loan, and
therefore as a payable if to be paid within a short time.

ChEAr$,
Harlan Lunsford, EA n LA

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- quote -

Hi Herb, thanks for the answer but I still don't understand
how I can get my balance sheet to balance if I don't have
account payable.

Say I have $100 expense charged to my credit card on Dec 30,
2006. So I include this expense for 2006 which would reduce
our P/L, which in turn reduces retained earnings, which in
turn reduces our capital account. So I need a corresponding
entry to make our Balance Sheet balance. Since we don't pay
this expense until Jan 07, as of Dec 31 2006, our cash
balance doesn't yet reflect this expense. So, we balance
our book by having a liability account.

Is my logic incorrect?

Regards,
Uly

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Herb Smith wrote:
- quote -

In that case then, what entry will you make on the books?
The debit(s) will be to expense(s); and the credit
to........ ??

ChEAr$,
Harlan Lunsford, EA n LA

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private...[at]gmail.com wrote:

- quote -

You don't have any accounts payable. You paid the bill by
charging it through a third-party (your credit card). When
you pay the credit card bill is irrelevant and has nothing
to do with your business finances.

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We are filing our 1065 on cash basis and as I understand it,
we deduct credit card expenses based on the year they are
charged, not the year they are paid.

My question is, since we incur expenses in Dec 2006 that we
didn't pay till Jan 2007, do we now have an account payable
in our balance sheet (schedule L) for the 2006 tax return?
Would this be a problem given that we are filing on cash
basis? Does this raise a flag with the IRS? TurboTax warns
that it is unusual for cash-basis filing to have any
accounts payable.

Thank you much.

Uly

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