Are Meals and Entertainment a Debit or Credit?
Meals and entertainment are a debit. Expenses increase with debits, so the full amount spent is debited to the account. The disallowed portion is a tax adjustment, not a reduced entry: record 100% of the cost on the books and make the adjustment on Schedule M-1.
- Account category
- Expense
- Normal balance
- Debit (Dr)
- Increases with
- Increase (Dr)
- Decreases with
- Decrease (Cr)
- Financial statement
- Income statement
Classifying one account is easy. Ledger IQ classifies the whole trial balance.
Try it freeMeals on a trial balance
| Acct # | Account | Debit | Credit |
|---|---|---|---|
| 1000 | Cash | 48,200.00 | |
| 1200 | Accounts receivable | 86,400.00 | |
| 1300 | Inventory | 72,500.00 | |
| 1500 | Equipment, net of depreciation | 82,000.00 | |
| 2000 | Accounts payable | 31,500.00 | |
| 2400 | Notes payable | 85,000.00 | |
| 3900 | Equity, beginning of year | 172,600.00 | |
| 4000 | Sales revenue | 550,000.00 | |
| 4100 | Sales returns and allowances | 12,000.00 | |
| 4200 | Interest income | 1,200.00 | |
| 5000 | Cost of goods sold | 240,000.00 | |
| 6000 | Salaries and wages | 96,000.00 | |
| 6050 | Officer compensation | 60,000.00 | |
| 6060 | Payroll taxes | 11,900.00 | |
| 6100 | Rent expense | 36,000.00 | |
| 6150 | Insurance expense | 14,400.00 | |
| 6200 | Utilities expense | 9,600.00 | |
| 6250 | Advertising expense | 7,200.00 | |
| 6275 | Meals (the account this page is about) | 4,800.00 | |
| 6300 | Depreciation expense | 19,000.00 | |
| 6350 | Amortization expense | 4,000.00 | |
| 6400 | Bad debt expense | 3,500.00 | |
| 6450 | Interest expense | 6,800.00 | |
| 6900 | Other operating expenses | 26,000.00 | |
| Total | 840,300.00 | 840,300.00 |
Example journal entries
| Account | Debit | Credit |
|---|---|---|
| Meals | 4,800.00 | |
| Cash | 4,800.00 |
| Account | Debit | Credit |
|---|---|---|
| Entertainment, nondeductible | 1,500.00 | |
| Meals | 1,500.00 |
Why it works that way
Spending money on meals reduces equity, which makes it an expense and a debit. The complication is not the entry; it is that the books and the return want different numbers from the same account.
Record 100%, adjust on the return
The books should carry the full cost. The disallowed portion is a book to tax difference that belongs on Schedule M-1.
Entering half the cost produces the right taxable income and the wrong everything else. The income statement understates what the business actually spent, the books no longer reconcile to the bank or the card statements, and on a pass through return the nondeductible portion never reaches the place it has to be reported.
That last part is the one with real consequences. On an 1120S, nondeductible expenses reduce the accumulated adjustments account and each shareholder's stock basis, and they are reported on Schedule K line 16c. Netting the disallowance into the expense means AAA is overstated, basis is overstated, and the K-1s misstate what the shareholder needs for their own return. A 1065 does the same through Schedule K line 18c.
The current rules in practice
Business meals are generally 50% deductible. Entertainment is not deductible at all, which has been the position since the 2017 Act, so a client event, sporting tickets or a golf outing gets no deduction even when the business purpose is genuine.
Some meals remain fully deductible, including certain employee events and meals provided for the convenience of the employer in specific circumstances. Those are worth separating, because a single meals account at 50% gives away the fully deductible portion.
Why the chart of accounts should do the work
Three accounts save the argument every year: meals at 50%, meals at 100%, and entertainment, nondeductible. Then the M-1 adjustment is a reading exercise rather than a reconstruction.
Clients with one combined account, or with meals buried inside travel or advertising, require an analysis to produce a defensible figure. That analysis has to happen somewhere, and doing it once in the chart of accounts is cheaper than doing it every March.
Where it fits in the accounting equation
Tax return treatment
| Form | Line |
|---|---|
| Form 1120 | Page 1 line 26 other deductions for the allowed portion, with the disallowed half on Schedule M-1 |
| Form 1120S | Page 1 line 19 for the allowed portion, with the disallowance on Schedule M-1 and as a nondeductible expense on Schedule K line 16c |
| Form 1065 | Page 1 line 20 for the allowed portion, with the disallowance on Schedule M-1 and Schedule K line 18c |
Common questions
Are meals and entertainment a debit or credit?
A debit. It is an expense account, and the full amount spent belongs in it. The disallowed portion is handled as a tax adjustment rather than by reducing the entry.
Should I record only the deductible half of a meal?
No. Record 100% on the books and make the adjustment on Schedule M-1. Entering half breaks the reconciliation to the bank statements and, on a pass through return, means the nondeductible portion never reaches Schedule K, where it reduces basis and the accumulated adjustments account.
Is client entertainment deductible?
No. Entertainment has been fully disallowed since the 2017 Act, including sporting events, golf and client outings, regardless of the business purpose. Keeping it in a separate nondeductible account makes the Schedule M-1 adjustment straightforward.
Why does the nondeductible portion matter on an 1120S?
Because nondeductible expenses reduce the accumulated adjustments account and each shareholder stock basis, and they are reported on Schedule K line 16c. If the disallowance was netted into the expense account, AAA and basis are both overstated and the K-1s are wrong.
Related answers
Go deeper
This page is the short answer. These articles work through the same ground in detail.
Last reviewed October 17, 2026.