Many businesses use credit cards. Using credit cards is convenient and helps manage cash, and there are other benefits to using credit cards such as getting cashback rewards.
How do you record cashback rewards in your books?
Here, the focus is cashback rewards that are earned on the purchase with a credit card, and that reduces the credit card payment balance.
Cashback rewards should be categorized as other income.
Since the cashback earned is generally considered non-taxable income, you always want to make it clear in your books so your tax preparer can help you correctly file your taxes.
The easiest and straightforward way is to create an account dedicated to categorize the cashback under the other income section called something similar to “credit card rewards.”
When you receive a cashback on your credit card, you categorize it to the specific account created.
This should do it 🙂
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