It’s always better to separate personal and business expenses as it simplifies the bookkeeping. However, if the owner of the business has paid business expenses using a personal credit card then they need to be recorded as expenses of the business in the accounting records.
If for example an owner pays business travel expenses of 150 using a personal credit card, then the amount would be debited to the travel expense account.
Journal Entry for Using Personal Credit Card For Business
The accounting records will show the following bookkeeping entries when a personal credit card is used for business.
Using Personal Credit Card For Business Bookkeeping Entries Explained
The debit represents the travel expense which is a cost to the business.
The owner has paid for the travel using their personal credit card. Until the amount is paid by the business it has an outstanding liability represented by the credit to the owners drawings account.
The Accounting Equation
The Accounting Equation, Assets = Liabilities + Owners Equity means that the total assets of the business are always equal to the total liabilities plus equity of the business. This is true at any time and applies to each transaction. For this transaction the Accounting equation is shown in the following table.
In this case the travel expense has reduced net income, retained earnings and the owners equity of the business. This has been matched by the credit to the drawings account increasing the owners equity in the business by the same amount.
The drawings account is a temporary account and is cleared at the end of each year. In this case the account is cleared either by a credit against the capital account, or repayment to the owner depending on the circumstances.
Popular Double Entry Bookkeeping Examples
The personal expenses journal entry is one of many accounting journals, discover another double entry bookkeeping example at the links below:
About the Author
Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.