Goldenseal Small Business Accounting Software Topics-- Credit Cards and Loans

Credit Cards and Loans

What's the difference between a credit card and a loan account?

A Credit Card account and a Loan account are very similar, and in many cases you can use either.

Here are some guidelines for choosing which type of account to use in Goldenseal accounting software:

Credit Cards

Usually a credit card is a "revolving" account where you can charge any amount and pay any amount. It usually keeps a zero or negative balance, since you sometimes owe money to the credit card issuer, but they won't owe money to you.

Some types of cards should not be entered as a Credit Card account:

If you have a debit card which withdraws funds directly from a Checking account or Savings account, you'll enter checking or savings transactions with it. Don't use a credit card account for it.
If you have a store credit card that you pay through the Pay Bills command, you don't need a separate Credit Card account for it. Goldenseal will already track the amounts due as part of your regular accounts payable.
If an account allows you to write sequential checks, enter it as a Loan account.

Loans

A loan can be a line of credit with a "revolving" balance, or it can have a fixed payment schedule.

You can write checks from a Loan account, so it really acts the same as a Checking account. If you can write checks from an account and usually keep a negative balance, enter it as a Loan account. If you usually keep a positive balance, enter it as a Checking account. However, the only real difference is where the balance shows up on your Balance Sheet report.

HINT-- If the account balance is positive and negative for exactly equal times, you'll need to flip a coin to decide which type of account to use (heads = checking, tails = loan). If the coin lands on its edge and stays there, you'll need to mail the coin to our tech support staff for a ruling ;-)

Click here to return to Accounting Software topics.