I do basic bookkeeping for my boss, although I’m not a bookkeeper. I have a question regarding paying credit card bills and recording credit card charges in Quickbooks Pro 2004. I want to make sure that what I am doing is the correct way to do it.
Bossman prints out his credit card statement along with the verification of his online bill pay payment and gives them to me. I create a bill, and use the Credit Card account I created for this card as the vendor. I pay the bill. Then I go to Record Credit Card Charges and enter each charge he made so that the individual expenses could be recorded to the correct GL account.
Bossman doesn’t think this is the correct way to do it, and that by doing it this way the expense is being counted twice. But I don’t think so. I did some basic research, and as I understand it, the two processes do separate things. Entering the bill under the credit card account and paying the bill is, in effect, the same as entering our phone bill and then paying it. Record Credit Card Charges simply itemizes the charges made, and is done that way precisely so we can record the expenses to the GL accounts without having to match them to an individual vendor.
The first half of this process keeps track of our checking account balance, and the second half of this process keeps track of what we spent that money on.
Right? I’m not double counting the expenses right?
Also, can someone please explain the difference between a liability account and an expense account? The credit card account is a liability account, right?