Some would wonder whether a personal debit card can be used as an account in a company. In this case, a client’s limited company, formed under the Republic of Singapore, has only one person holding the position of both director and shareholder. In this case he would like to know the legitimacy and liability of the director using his personal debit card for expense transactions of up to 70% of the company’s expenses on a monthly basis.
As for its legitimacy, it is stated under the common accountancy practice that the debit card should be used exclusively for the company. No amount of usage should be considered on the owner’s side. This debit card is then used as a dedicated account.
As for its liability, the debit card by nature is not a liability since it is not a credit card. This kind of relationship is considered as “fund-hold-on-trust” on a legal basis. In the event of a limited company becoming insolvent, its creditor(s) will have the rights to claim any assets including the debit card for it is also an asset..
There are two types of accounting treatment options for a personal debit card being used by a company: Third Party Account (i.e. Director Account) and A Cash & Cash Equivalent (i.e. Debit Card Account).
Any deposit made to the concerned debit card shall be made by sources under the name of the company. The director has to ensure that no personal fund is left before handing the card over for the company’s use.