Why doesn't "Credit Card Payment" show up as an expense?

In short, GoDaddy Bookkeeping doesn't count a credit card payment as an expense because the expense was already recorded at the time of the purchase.  That's why credit card payments (and all transfers that simply reflect money moving form one account to another) are considered Non-Business.  In other words, they are NOT reflected in business reports. 

Consider this example: 

You sell knitted scarves on eBay and have a credit card with a $2K limit on it.  You go to the craft store and buy $500 worth of yarn and knitting needles, putting the purchase on your credit card.  Assuming you've linked your credit card to GoDaddy Bookkeeping, the purchase will be recorded under "Expenses," and you'll likely want to classify it as "Cost of Goods Sold" or as a custom category called "Inventory" or "Materials".

The end of the month rolls around, and you're looking at your bookkeeping account.  If you've set up your credit card payment as an automatic transfer from your bank account, it'll show up as "Credit Card Payment" automatically.  However, if you write manual checks, you may notice that the check shows up under "Uncategorized".  You go to categorize that particular transaction as "Credit Card Payment" and notice, all of the sudden, that your Profit goes UP by the amount of your credit card payment.  The sun shines even brighter! Why is this? Shouldn't GoDaddy Bookkeeping subtract that number from Profit, to record your expense? 

The answer is "no," because it already recorded the expense, and recording the credit card payment as an expense, too, would cause your profit to be understated!  The secret here is that GoDaddy Bookkeeping does do double-entry accounting, but not where you can see it.  The double-entry accounting happens on the back end.  Traditionally, accounting is a very detail-oriented process, and every single transaction affects at LEAST two accounts.  GoDaddy Bookkeeping keeps track of these on the back end, and simplifies the front-end.  So all you need to do is go over things once-a-month and make sure that your transactions are getting categorized correctly. 

Have more questions? Submit a request

Comments

Powered by Zendesk