How do I account for the government stimulus business loan of 40K?

Hello @Dan Barber ,

You will need to set up a Long-Term Liability account in your COA for this loan, naming it appropriately (perhaps CEBA Loan for 'The Canada Emergency Business Account' Loan.  Your initial entry will be:

DR     Bank

CR     Loan Liability Account

Each time a payment is made, the entry will affect the accounts as follows:

CR    Bank

DR    Loan Liability Account

If the loan is repaid by December 31, 2022, 25% will be forgiven (up to $10,000).  If this is the case, the following JE would need to be made:

DR    Bank

CR    Other Income Account (not Sales income as it is not from operational activities)

If the loan is not repaid by December 31, 2022, the remaining balance will be converted to a three-year term loan at 5% interest.  At this point, you would need to get yourself an amortization schedule (a very good one is here:  https://www.cchwebsites.com/content/calculators/CASimpleLoan.html), beginning with the Loan Balance as of Dec 31, 22, and calculated with simple interest until the loan is paid off in full.  Let's say that you had only paid back $20,000 by Dec 31, 22.  Amortization would be as follows:

Of course there would be 36 payments in total.  You can originally set up your loan payments of $599.42 to recur each month.  But you would then have to go into each monthly payment and edit the payment to distribute amounts to the following accounts (using first payment in schedule as example):

DR    Interest Expense        $  83.33

DR    Loan Liability Acct     $516.09

CR    Bank                                                     $599.42

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                                                $599.42         $599.42

Hope this helps :)