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klhunz
July 17, 2020
Question

Clearing an old loan from Chart of Accounts

  • July 17, 2020
  • 1 reply
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I am trying to clear an old loan from the Chart of Accounts.  We got the loan in 2012 for $44,138.40 and paid it off with biyearly payments in 2016.  Once the account was created in the Chart of Accounts, my bookkeeper at the time never did anything else with it.  Now it's showing up in my tax reports and I need to get it out of there.  Can anyone give me any information on how I should go about doing this?

 

Thank you in advance.  I'm a newbie at bookkeeping, and learning as I go, so I don't want to make any mistakes.

 

Kris

1 reply

john-pero
john-pero
July 18, 2020

Don't worry, you cannot make any mistakes worse than the previous bookkeeper of improperly recording loan payments.

 

Without seeing how these payments were handled,  if they were even paid back with business funds or personal funds it is impossible to tell if you have a pending tax consequence. You just missed the window to amend the 2016 tax return 2 days ago so all you can do is move forward. 

 

Good news is payback of principal is not a taxable event although you may have missed getting a deduction for interest paid.

 

At this point I would use a journal entry to debit the loan account and credit owner equity

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