Credit cards can be a useful tool for paying property expenses, but they must be handled correctly to keep your accounting accurate.
One of the most important things to understand is that a credit card is not a bank account and it is not an expense account.
A credit card should be set up as a liability account because it represents money that is owed to the credit card company.
Think of a Credit Card as Borrowed Money
When you use a credit card, the credit card company pays for the purchase on your behalf.
You then owe that money back to the credit card company.
Example
You purchase a refrigerator for Property A for $1,000 using a credit card.
What happened?
Property A received a refrigerator.
The credit card company paid the vendor.
You now owe the credit card company $1,000.
The refrigerator expense belongs to Property A, but the credit card balance represents a liability that must be repaid.
Setting Up the Credit Card in Propra
Credit cards should be set up as a Liability Account.
This allows Propra to track:
Purchases made on the card
Outstanding balances
Payments made toward the card
As purchases are made, the liability balance increases.
As payments are made, the liability balance decreases.
The Property That Benefits Should Pay the Cost
A common mistake is paying a credit card bill using money from the wrong property.
In trust accounting, each property's money must remain separate.
Example
Property A's credit card purchases:
Refrigerator = $1,000
Plumbing supplies = $200
Total credit card balance related to Property A = $1,200
When paying that balance, the funds must come from Property A's Rent Trust Account.
Recording the Original Purchase
When a credit card is used, the expense should be recorded immediately.
Example
A refrigerator is purchased for Property A.
Expense: Appliance Expense $1,000
Credit Card Liability: $1,000
The expense is recorded when the purchase occurs, not when the credit card bill is paid.
Paying the Credit Card
Eventually the credit card company must be repaid.
This payment does not create a new expense.
The expense was already recorded when the refrigerator was purchased.
The payment simply reduces the amount owed to the credit card company.
Example
Property A pays $1,000 toward the credit card balance.
What happens?
Credit card liability decreases
Rent Trust balance decreases
The debt is being repaid.
Journal Entry Example
When making a payment toward the credit card, the transaction should reduce both the liability and the cash available in Rent Trust.
Example
Property A pays $1,000 toward its credit card balance.
Account | Entry |
Credit Card Liability | Debit $1,000 |
Operating Rent Trust Account | Credit $1,000 |
What this means
The amount owed to the credit card company decreases.
The cash available in the Rent Trust Account decreases.
Both balances now accurately reflect what happened.
Why This Matters
Recording credit cards correctly helps:
Keep trust accounting compliant
Maintain accurate property balances
Produce accurate owner statements
Ensure proper bank reconciliations
Prevent one property from paying another property's expenses
Most accounting issues involving credit cards happen when expenses are assigned to one property but paid using another property's funds.
Quick Summary
Credit cards should be set up as Liability Accounts.
The expense is recorded when the purchase is made.
The property that benefits from the purchase should ultimately pay the cost.
Property funds must never be mixed.
Paying the credit card reduces the liability balance.
Payments should come from the same property's Rent Trust Account that incurred the expense.