What is credit card payable?

Definition

Credit card payable is a current liability for the unpaid balance on company credit cards. On the books, this line is what you owe the card issuer, not a stack of vendor invoices in accounts payable.

A charge raises this liability when it posts to the card. The related cost, or the stock, was recorded at the same time.

If you keep books on the cash basis, some shops still carry a card balance. The card issuer is owed even if you record other costs only when cash leaves the bank.

On the accrual basis, you record the charge when it hits the card, even if the statement is not due until next month.

Where it shows up

Balance Sheet: Located in the current liabilities section.

P&L: Related to the expenses already charged to the card.

Cash flow: Decreases in this account, reported cash from operating activities decreases.

See also: Current Liabilities · Corporate Card Program · Account Reconciliation

When you look at your Balance Sheet, this line sits in current liabilities, near accounts payable and other short-term amounts. When the balance is high, more charges are waiting for the next card payment; when it is low, you have just paid the statement, or spending on the card was light.

The Income Statement does not list this account as a line. Related expense already hit the P&L when the charge was a cost, not when you paid the card.

On the Statement of Cash Flows, the payment to the card issuer is the cash event. Cash from operations falls when you pay, and this liability falls with it.

A corporate card program is the set of company cards and the rules around them. This account is the unpaid statement total those cards still carry.

How it works

A typical path starts with a charge. Someone buys supplies, software, travel, or stock with the company card.

The books debit an expense or an asset and credit this liability. Cash has not left the bank yet.

That is different from accounts payable. AP is unpaid vendor invoices; this line is the card company's balance.

A bank feed often imports the charges. Each imported line still needs the right expense or stock account, not a second pass through AP.

An expense report may support employee charges on the same card. The source document is the receipt or the card statement line that proves the charge.

A spend policy sets what may be bought and who must approve it. The liability still rises when a valid charge posts, even if approval was late.

When you pay the statement, you debit this liability and credit cash. The payment does not create a new expense.

At month end you reconcile the ledger to the card statement. The books should match the issuer's ending balance, after outstanding payments in transit.

Personal charges that slipped onto a company card still sit here until they are repaid or reclassed. They are not business expense; they are amounts the person owes the company, parked against this balance until cleared.

If you pay a vendor bill with the card, AP for that bill falls and this liability rises. You moved the owe from the vendor to the card issuer; you did not pay it in cash.

Example

A comic shop buys $500 of back issues from a distributor on the company card. The comics arrive the same day, and the charge posts that afternoon.

The shop records:

Debit: Inventory $500

Credit: Credit card payable $500

Inventory (an asset) and this liability both go up by $500. Cash has not moved.

The Balance Sheet is larger on both sides. The Income Statement has not changed yet, because the comics are still in the boxes.

Two weeks later the shop pays the $500 card balance:

Debit: Credit card payable $500

Credit: Cash $500

This liability for that charge falls back to zero, and cash falls by $500. No second expense hits the P&L; paying the card only settles the owe.

Common mix-ups

Credit card payable is not accounts payable. AP is unpaid vendor invoices; this line is the unpaid balance on the card statement.

Paying the card is not a new expense. The cost, or the inventory, was recorded when the charge posted.

A bank feed is not this account. The feed imports the charges; this line is the unpaid total those charges built.

Related terms

• Current Liabilities: Obligations due within the next twelve months.
• Corporate Card Program: Company-issued cards used for employee purchasing under set rules.
• Account Reconciliation: Proving that a ledger balance agrees to independent support.
• Expense Report: An employee's submitted record of business expenses to be reimbursed.
• Bank Feed: The automatic import of bank transactions into the accounting records.
• Spend Policy: The written rules for what employees may buy and how it must be approved.
• Accounts Payable: Amounts the business owes vendors for goods or services already received.
• Source Document: The original receipt, bill, or statement that supports an entry.