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MelissaMGregory
April 23, 2018
Question

Recording a line of credit loan from S corp bank account to the owner's personal bank account.

  • April 23, 2018
  • 1 reply
  • 0 views

The owner of the S-corp company took out a line of credit. The money was deposited into our company bank account, then transferred to his personal bank account. He wants to start making payments back to the bank for the  loan. How do I set up this type of loan?

    1 reply

    EmilyMockett
    EmilyMockett
    April 24, 2018

    Hi Melissa,

     

    Firstly the loan amount would be transferred into a Current/Non Current Liability account (depending on how long the owner expects it to take to pay back - if less than a year it should be placed in current').  When the payments are made these should also be transferred to the same account, thus reducing the liability.

     

    I hope this makes sense.

     

    If you have any other questions please do not hesitate to private message me.

     

    Kind Regards,

    Emily

    M
    MelissaMGregoryAuthor
    April 26, 2018

    Hello Emily, 

     

    Thank you so much. Just another question you might can help with. So I am setting up the account for the other current liability loan ( it will be paid off within a year). I guess I am confused on how to properly set up the loan to record it accurately. 

    So, the single owner of the company borrowed from Company's line of credit. The bank deposited into our company bank account, then withdrew it to deposit into the owner's personal account. The owner wants me to start making payments on the loan from business bank account to the loan with the same bank. 

    Not sure how to show the deposit from bank into our bank account than debited back out to the owner for reconcilation purposes.  

     

    Right now on Chart of accounts I have Other Current Liabilities, but not sure if the detail type is Line of Credit or Loan payable. 

     

    Thanks so much :) 

    Melissa

     

    EmilyMockett
    EmilyMockett
    April 27, 2018

    Hi Melissa,

     

    I am glad that I could help.

     

    So the bank depositing the money into your business bank account is to be transferred to the current liability account for the loan you have created. When the owner withdrew the amount from the company the loan amount this should be a transferred to Directors Current Account. When you make the payment from the business bank account to the loan account you can trasfer this money to the current liabilty loan account. Effectively the drawing from the director out of the bank account is entirely seperate and they will still owe this money until they deposit the money they owe to the business back into the business current account. 

     

    It will be Loan Payable. I hope this makes sense.

     

    Kind Regards,

    Emily

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