accounting for available credit
Tue, 6 Aug 2002 01:31:56 -0400
In accounting terms, is there a way to record the credit limit
and/or available credit on a liability account like a credit card or
ilne of credit? When a purchase is made using a credit card, for
instance, it obviously increases liabilities and expenses, but it
also reduces the amount of available credit. Simply having a home
equity loan approved increases available credit, borrowing against
it decreases it again, and repayments of principle increase it.
However, "available credit" doesn't seem to fit neatly into the
traditional asset, liability, income or expense categories.
Could it be treated as a "future liability" sort of account under
Liabilities? If so, it seems like the expense category would have to
be chosen when the account is first opened. I know I'm not the first
person to look at this situation. Any pointers?