Where do I enter tools purchased with a Credit Card?
(Mt Dora , FL USA)
We (my husband's and I) started a Home Inspection business in June. It is completely service based. No inventory. I am entering all receipts from the start up. Do the tools we charged on the business credit card go in Assets account, or Liability. The credit card still holds a balance.
I.am very excited to find your site. : )
Very rusty book keeper.
Hi Tonya! (aka Very Rusty Bookkeeper)
Glad you found my site too!
With a home inspection business, you would definitely need tools.
When you post the credit card purchases, I would treat them as an asset. You would then depreciate them, and either take a Section 179 deduction for the whole amount this year, or depreciate them over their useful life, which would be 5 years.
Keep a sheet of paper or Excel spreadsheet listing each tool and the purchase price for depreciation purposes.
However, if you buy anything small, like, oh, I don't know, nails, drill bits, little screwdrivers that break often, or anything like that, I would post that as Supplies Expense.
Oh, and if you carry a balance on your business credit card, set up a Liability account for that credit card, call it something like "Big Bank Credit Card Payable", and post your charges and payments to that account.
Hope that helps, Tonya. If you have any other questions, give me a shout!