Due to Cov19, business shut downs in Pennsylvania. Ended 2020 with credit card
balance due to Advertising, Supplies, Utilities, phone... On cash basis, paid on charges but
left with over $17,000.00 in charges on the credit card. September to end of the year.
Can I make a negative asset account, showing and recording the expenses?
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You've got current liabilities of $17k for your credit cards and need to offset that with a charge to RE.
The expenses should have been recorded and deducted on your tax return when they were incurred. Once you charge them, they are deductible even on a cash basis tax return.
If you haven't deducted the expenses you should deduct them in 2020 if they were incurred this year, or amend the returns for the periods they were charged to the card.
If you default on the credit card charges and the debt is forgiven, you may have to include the cancelled debt in your taxable income.
I knew that but didn't know the right way to do it. Do I create an Assets account, like a Bank Account, then run the charges.
I seek to clarify what type of account I would create. Create a separate Bank Asset account for
the Credit Card or a Retained Earnings account? This is for a S-Corp where everything flows through.
Reread @ThomasM125 response.
If you charged the expenses in 2020, then you need to reflect those as expenses on your 2020 books and records. The entry would be no different than if you had purchased each items separately; which is how you will enter the expenses incurred. You will debit whatever expense account the item applies to and then credit a liability; credit card liability account. When it is paid, you will debit the credit card liability account and then credit cash.
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