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How do I categorise credit card cashback amounts?
I get cashback amounts every month with my credit card and I wonder how to categorise these transactions correctly. Should they be Other Money In/Interest Received or Other Sales Income or something else?
I’m not sure
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Inappropriate?Nelson,
You might want to chat to your accountant, but I would call them Interest Received... -
Inappropriate?I have the same problem, I'm using a personal credit card purely for business purchases in a limited company. The card is paid off monthly via the business bank account. If I categorise the cashback as interest received this causes me a problem because we are flat rate VAT registered. Bank interest is part of a flat rate VAT return, so my numbers will be out. The credit card cashback is not paid directly to that personal but sits in the credit card account to be used for future business purchases.
I’m in need of help
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Inappropriate?Hi Gavin,
I'm FreeAgent's in-house accountant - may I help.
My reading of your situation (which is, I think, different from Nelson Grain's) is that the cashback is money you've received personally, because it's cashback on a personal credit card. It's not money that's been earned by the company through trading, but money that's been earned by you personally, because you have that credit card. (This would be different if the credit card were a company credit card.)
I'm assuming you have the credit card set up as a bank account in FreeAgent?
if you have it ticked as a personal account then you will need to untick that box (click the bank account on the left-hand menu under Banking, then click the Edit Details button to find this).
Then record the cashback as Money Received from User, with reason "Payment to Director's Loan Account".
Does that help, please?
Kind regards,
Emily -
Inappropriate?Emily, thanks for the helpful reply.
Yes the credit card is set up as a bank account in FreeAgent with the personal account ticked. Once I have unticked this option should I leave it off permanently?
I’m thankful
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Inappropriate?Hi Gavin,
If the cashback is going to recur regularly, then yes, I would leave this option permanently unticked. This is because you can't record Money Received from User into a personal account.
Kind regards,
Emily
I’m happy to help
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Inappropriate?Hi Emily,
No it's not regular just once a year. What is the reason to have the personal account ticked? Should I just untick add the cashback figure then tick the personal account again? -
Inappropriate?Hi Gavin,
Personal accounts don't have to have all their transactions explained, but you can't record money received from / paid to a user from a personal account (because that would be a non-business transaction).
I'd make a judgement call depending on how many transactions you have on that card that aren't business. You say you only have a few (i.e. cashback only, if you use the card just for business), so you could leave the card marked as a business account.
Kind regards,
Emily -
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Inappropriate?Hi Gavin,
No problem at all. Please don't hesitate to ask if you get stuck again.
Kind regards,
Emily
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