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LiveToLearn
January 24, 2022
Question

Journal Entries and Owner Loan

  • January 24, 2022
  • 1 reply
  • 0 views

Hello All!

 

I am new at this, and I've hit a snag. Hopefully someone can help point me in the right direction.

 

The owner recently started the business. In order to have funds in the bank, 4 different deposits on 4 different days were put in the account for general operating purposes. A few months later the loan was repaid.

 

However, the JEs want me to have one per deposit, and to have each one balance out for debits. This won't work in this case, as again, the loan was for general purposes. Either taken as individual deposits, or lumping together in one sum, the debits do not equal the credited amount.

 

Is there a way to create one JE to show the total 4 items credited, and yet show that the numbers won't match? Or, if multiple JEs need to be done, how to account for the fact that the credits and debits won't match, and that the owner was repaid (current liabilities) shortly thereafter?

 

I appreciate the time!

 

Thank you.

1 reply

Rustler
Rustler
January 25, 2022

You can not have it both ways, either the loan to the business was repaid, or it was not. If it was repaid then the journal entries will match.

 

Accounting needs to mimic real life, if there were 4 deposits then there are 4 entries.

 

BUT, if the business is taxed as a sole proprietor, technically the owner is the business and can not loan money to himself. The money deposited would use owner equity investment as the source account for the deposit. When he wants his money back he would enter a payment and use owner equity drawing as the expense (reason) for the payment.

 

Journal entries should be avoided in QB, they often do not work as desired and do not show in some reports

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