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ginatorres
October 19, 2023
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deduction from a check that applies to a repayment

  • October 19, 2023
  • 2 replies
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Hi there, having a bit of trouble with HOW to make a situation work within Quickbooks Premier Professional Services Edition (currently running Desktop 2020).  I've stepped in to record-keep and by no means am an accounting person, so here it goes: 

 

We record payroll in the system, not utilizing the true payroll functionality, and have a situation where we are deducting an amount, lets say $100 from someone's check in order to apply it to a loan (listed as an Other Current Liability).   When deducting from the check to apply directly to the loan account it's increasing the balance, not reducing it.  I can't for the life of me figure out how to make it work so that the deduction applies correctly and I can reconcile everything at month end..  Can provide more detail as necessary, and thanks in advance! 

Best answer by Rainflurry

@ginatorres 

 

OK, that makes more sense now.  There is no asset account in this case.  You want to move the withheld amount to the owner's equity account with a journal entry, (debit withholding liability, credit owner's equity account) and then make the payment on the loan from the bank account.  That increases the owner's equity in the business by the amount withheld and the payment from the bank account reduces the loan liability.  

2 replies

F
FateCandylaneT
October 19, 2023

We appreciate you reaching out here with your concern, ginatorres. I've come to share insights to help you handle employee loans in your account.

 

As I've tried it on my end, recording the transaction using an Other Current Liability account decreases the balance of the loan account. Thus, to help us rectify the incorrect balances, we recommend reviewing the account used when setting up an employee loan account.

 

Additionally, you can consider taking into account the insights shared by Pete_Mc on how to set up a loan account for an employee. This way, tracking employee loans will be entered accurately and ensure your accounts are balanced.

 

Moreover, I've added this guide to help you automate the matching process of your transactions and streamline the categorization of your entries: Create rules to categorize transactions in QuickBooks Desktop.

 

We'll keep this thread available so you can always reply below if you have additional queries when managing loans. Just keep us posted, and we'll get back you up. Keep safe.

    Rainflurry
    Rainflurry
    October 19, 2023

    @ginatorres 

     

    Are you trying to apply this to reduce the loan balance that the employee owes the company?  If so, the employee's loan should be listed as an asset, not a liability.  If you deduct $100 from an employee's paycheck, you now owe that money TO someone (to yourself or someone else).  That is why it is increasing the liability account.  Therefore, you cannot apply a payroll deduction to a loan that you owe (a loan payable liability), it needs to be applied to a loan you are owed (a loan receivable asset).  Let me know if you need more help with this.  

      G
      ginatorresAuthor
      October 20, 2023

      That does make sense to me, but when i go back to reconcile I'm not able to track anything.    More detail:

       

           The loan is a business account/credit line

           The employee is actually the owner

      Money was borrowed from the credit line directly into a business checking account.  Used for a business expense.  The employee/owner is utilizing his own money to pay back the loan, a bit from each paycheck.  

       

      In physically recording this, I would make an actual transfer from business checking to the credit line as a payment.  That portion is not registering within Quickbooks if I'm tagging that deduction to the Asset repayment.  When we reconcile we're always "off"

       

      Rainflurry
      RainflurryAnswer
      October 20, 2023

      @ginatorres 

       

      OK, that makes more sense now.  There is no asset account in this case.  You want to move the withheld amount to the owner's equity account with a journal entry, (debit withholding liability, credit owner's equity account) and then make the payment on the loan from the bank account.  That increases the owner's equity in the business by the amount withheld and the payment from the bank account reduces the loan liability.  

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