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sw1222
February 5, 2025
Question

categorize payment correctly

  • February 5, 2025
  • 1 reply
  • 0 views

Hi,

My boss asked me to create an invoice and bill his credit card for the invoice (in order to get points on his cc).

He then wanted me to pay him back by wiring the money that came in, back to his bank account for which he paid the card off.

How do i categorize each step of this transaction?

 

1 reply

FishingForAnswers
FishingForAnswers
February 5, 2025

@sw1222  Your language is a bit vague, and the exact steps involved would depend on the type of company involved.

 

Regardless, a customer is a customer. If your boss wants to put up their own money to buy something from the company, that's their prerogative, same as an owner could buy something from their own store.

 

The invoice would be entered as a normal invoice would be for a normal customer. This would increase the income of the store per usual, and likely lead to an increased income tax burden at year end for however much money is involved.

 

The money wire back would be a draw against owner's equity, whether that be a simple Owner's Draw (Sole Proprietorship) or something more like a Guaranteed Payment or Shareholder Distribution (S-Corps, Partnerships, etc).

Rainflurry
Rainflurry
February 6, 2025

@FishingForAnswers 

 

If I'm reading the original post correctly (I may not be), it sounds like they want to create a bogus transaction solely to charge the owner's cc to get points.

 

@sw1222 

 

Am I understanding that correctly?  If so, assign create an other current liability account (OCL) called "Due to Owner/Partner/Shareholder" depending on the type of business entity this is.  Then, assign that as the income account to a service product (call the service product whatever makes the most sense to you).  Add that service product to the invoice.  Pay the invoice.  Reimburse the owner by assigning the same "Due to Owner/Partner/Shareholder" OCL to the payment/wire made to the owner.       

    FishingForAnswers
    FishingForAnswers
    February 6, 2025

    @Rainflurry  "---it sounds like they want to create a bogus transaction solely to charge the owner's cc to get points."

     

    That's definitely the impression I was getting.

     

    I admit, I structured my answer mostly around the CYA principle; the concept felt a bit shady, considering that you could just do so indefinitely to manipulate the rewards system without losing a material amount of funds or taking on a material liability.

     

    If that is not a concern, I'd say your solution is the better one.

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