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ATestaPBC
February 25, 2024
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How to Correctly categorize a Loan from Owner

  • February 25, 2024
  • 1 reply
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Recently our company converted from an LLC to a C-Corp. Each of the three LLC owners, who are now shareholders/officers of the new company, loaned different amounts to the C-Corp to have cash on hand to begin business. The loan checks have been deposited, and now I need to categorize each transaction in QBO to match the bank transaction made. I believe the loans are to be considered long-term liabilities for the account based on the agreed upon terms, however, I am not sure if I need to add/change the vendor/customer entry? In the LLC, when a draw was taken, the entry has us listed as an employee. Will this work or do we need to make a new name for each owner and specify as such? The loans will be accounted under each name as a long-term, my concern is not changing the vendor/customer's name will cause issues.

Best answer by

Warm greetings ATestaPBC, I hope you are doing well. I have the information you need about recording loan repayments.

 

To record a loan from the company's owner or officer, you must first create a liability account for the loan, and then create a journal entry to record the loan. Finally, you need to record all payments for the loan.

 

The account type you choose depends on the repayment time frame. You can select Other Current Liabilities if the loan will be paid in full within a year, or Long Term Liabilities if it will take more than a year.

 

To create a liability account for the loan, follow these steps:

 

  1. Go to Settings and select Chart of Accounts.
  2. Click on New.
  3. Choose either Other Current Liabilities or Long Term Liabilities from the Account Type drop-down list, depending on the loan type and repayment time frame.
  4. Select either Other Current Liabilities or Long Term Liabilities from the Detail Type dropdown list.
  5. Enter a Name for the account, for example, Loan from Officer/Owner.
  6. Leave the Unpaid Balance field blank.
  7. Click on Save and close.

 

Next, create a journal entry for the loan by following these steps:

 

  1. Select + New.
  2. Choose Journal Entry from the Other option.
  3. Enter the loan amount and log the appropriate amounts to the relevant expense accounts. For example, credit the Liability/Loan account and debit the appropriate expense accounts.
  4. Click on Save and close.

 

Finally, record payments made on the loan by following these steps:

 

  1. Select + New.
  2. Choose Check from the Vendors option.
  3. From the Account dropdown list, choose the liability account you created for the loan.
  4. Enter the payment Amount.
  5. Click on Save and close.

 

Keep in mind, that if you are unsure which liability account to use, it is best to consult your accountant.

 

Also, you can check the following articles to help you track what you've entered inside your company file:

 

 

I hope this information helps you with tracking loan repayments inside QuickBooks. Don't hesitate to contact us again if you need further assistance. Stay safe!

1 reply

A
Anonymous
Answer
February 25, 2024

Warm greetings ATestaPBC, I hope you are doing well. I have the information you need about recording loan repayments.

 

To record a loan from the company's owner or officer, you must first create a liability account for the loan, and then create a journal entry to record the loan. Finally, you need to record all payments for the loan.

 

The account type you choose depends on the repayment time frame. You can select Other Current Liabilities if the loan will be paid in full within a year, or Long Term Liabilities if it will take more than a year.

 

To create a liability account for the loan, follow these steps:

 

  1. Go to Settings and select Chart of Accounts.
  2. Click on New.
  3. Choose either Other Current Liabilities or Long Term Liabilities from the Account Type drop-down list, depending on the loan type and repayment time frame.
  4. Select either Other Current Liabilities or Long Term Liabilities from the Detail Type dropdown list.
  5. Enter a Name for the account, for example, Loan from Officer/Owner.
  6. Leave the Unpaid Balance field blank.
  7. Click on Save and close.

 

Next, create a journal entry for the loan by following these steps:

 

  1. Select + New.
  2. Choose Journal Entry from the Other option.
  3. Enter the loan amount and log the appropriate amounts to the relevant expense accounts. For example, credit the Liability/Loan account and debit the appropriate expense accounts.
  4. Click on Save and close.

 

Finally, record payments made on the loan by following these steps:

 

  1. Select + New.
  2. Choose Check from the Vendors option.
  3. From the Account dropdown list, choose the liability account you created for the loan.
  4. Enter the payment Amount.
  5. Click on Save and close.

 

Keep in mind, that if you are unsure which liability account to use, it is best to consult your accountant.

 

Also, you can check the following articles to help you track what you've entered inside your company file:

 

 

I hope this information helps you with tracking loan repayments inside QuickBooks. Don't hesitate to contact us again if you need further assistance. Stay safe!

    A
    ATestaPBCAuthor
    February 26, 2024

    Thank you I hope I did it correctly.

    A
    AnneMariee
    February 26, 2024

    Hello, ATestaPBC.

     

    We are pleased to hear that the information provided by our colleague was helpful. Our goal is to ensure that our users stay on top of their business.

     

    If you need further assistance, please visit the Community again. We're always available if you require any further assistance. Have a great day, and stay safe!

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