@Karen wrote:
I spoke with my CPA and told me it's wrong and never to use "Other Asset" type account for credit card related transactions. Use "Other Current Asset" type account in QuickBooks. On the Balance Sheet, all the asset types are the not same, they've different financial meaning.
I then Google myself and learned the difference between "Other Current Assets' type account and "Other Assets" type account on the Balance Sheet. Yes, it's an error to use "Other Asset" as suggested here.
Your CPA is correct. Current Assets and Other Assets do have different meanings on the Balance Sheet.
If I had to guess, I would say that the suggestion to use "other asset" was an oversight that didn't take this classification into account. Many small businesses don't know the difference, and they wouldn't be impacted by the misclassification either; however, the more accurate classification would be a current asset.
My original suggestion for an IC loan was to use a new AR account, which is also a current asset, and would allow the user to toggle between the IC loan account and regular AR when applying payments and cc charges in QB; however, you would have to be careful to not apply charges incorrectly between the two AR accounts. On the flip side, using "other current liability" or a second AP account for an IC loan is also a current liability, rather than "other liability". Using the second AP account allows toggling between accounts for entering bills and applying payments, but it also requires attention to detail to avoid erroneous entries.
Using the IC loan suggestion would be best suited for a company that plans to continue to use the accounts though. They would need to document the agreement between the companies, the repayment terms, and whether items are charged at cost or with a markup of any kind, and then the entries would need to match between both companies each month. It's not really for a one-time fix, but more for a situation where one company may make purchases or provide services to another related company.
Equity accounts are an option for a one-time fix, depending on the tax structure of an entity, but I definitely recommend discussing all of these entries with a tax professional to determine the best treatment for any particular set of companies since these are all entries that would affect tax reporting, potentially on multiple levels.
