Expert: Denise Delozier - 2/19/2004

Question
How should credit card interest be classified?  Interest Paid or Interest Expense or something entirely different.

Answer
Shawn,

Usually, as a default, you only have Interest Expense, and that's where all of your credit card interest should go. The only time I separate interest expense is if you have situations where you have some deductible interest and some non-deductible interest payments to track.  If that's not the case in your situation, you may want to make your life simpler by merging the two accounts you are showing so that everything is tracked in the same location.  If you are using Quickbooks or Quicken, since they both create new accounts "on the fly" as you do your data entry, it's not uncommon to have two different accounts that serve the same purpose. From time to time, every Quickbooks user has to "clean up" the chart of accounts and merge similar accounts that have been created like this.

Since the merge function cannot be undone, I would highly recommend running a profit and loss report (showing ALL dates), then analyzing the information that is included in each category to see if there is a valid reason why the two are separate.  If no reason is apparent, then I would definitely consider merging them, (or at the very least, changing the one that is not being used regularly to an "inactive" status).  

If you need more help on doing either of those things, please feel free to write me back and I will be happy to take you through the steps.  

Have a great week!

Denise