Allowing employees to use a company credit card for personal items is inadvisable because the company is responsible for all expenses on the bill. If the employee fails to repay the company within a reasonable period, that amount may become taxable wages to the employee, subject to all employment taxes, which means that the company must pay its share of FICA and other employer taxes.
But if your company provides employees with credit cards, sooner or later some employee is going to use it for some personal item. If this occurs, create and debit an appropriate receivable account, such as Due From Employee—Ted Jones, to recognize the employee’s responsibility for reimbursing the company.
Example: Tuesday evening, employee Rosa Vasquez Green can’t find her personal credit card, so she pays for dinner with the company card and alerts you to what she did first thing Monday morning. When you receive that month’s credit card bill for $2,240, you see the charge; it is $90.
You record the following entry:
|Due From Employee – R. Vasquez.||
|Postage and Office Expense||
|Meals and Entertainment Expense||
When Rosa reimburses the company, you will record the following entry:
|Cash in Bank||
|Due From Employee—R. Vasquez||
Reprinted with permission from Bookkeeping Tips published by AIPB. All rights reserved.