Question

Set up loan to company officer/shareholder

Forum|Forum|1 year ago
November 5, 2024
3 replies
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All articles address loans from the company to someone. Our president borrowed $200k from the S corp and will pay it back over about 2 years. Can this be done in QBDT?

QuickBooks Enterprise Suite

R

RoseJillB

Yes, it can be, @ormic1.

First off, we can set up an account to enter the loan transactions and track them in QuickBooks Desktop (QBDT). Let's begin by following the steps below about setting up a liability account for your company officer loan.

Go to the Lists menu and select Chart of Accounts.
Drill down the Account dropdown and choose New.
Choose the Long Term Liability from the Other Account Types when choosing an account type.
Click the Continue button to proceed.
Enter an Account Name. e.g. Loan from Officer/Owner and other account information you may have to personalize.
Leave the Opening Balance blank, and click Save & Close.

Second, let's create a journal entry to record the loan in your books by debiting the bank account from which the loan was taken out and crediting it to the liability account we recently created. I also suggest consulting your accountant when entering the amounts.

Then, we can create a bank deposit once the loanee makes a payment.

Let me know if you have additional queries about logging loan transactions to your company file and any QuickBooks-related matters. I'm just a post away to help you. Take care!

BigRedConsulting

@RoseJillB RE:Enter and log the proper amounts to the appropriate expense accounts. Thus, you enter the $200k amount under the Credit column affecting the liability account we recently created, while the appropriate expense accounts are decreased, or debited.

There no significant expenses associated with loaning someone money. Certainly, the entire balance of the amount loaned is not an expense! That makes no sense at all.

Also, when the payments come in to pay off the loan, they should be recorded as deposits, not as checks. Money coming in will of course be deposited, not written as a check.

BigRedConsulting

Yes, it can be done.

To do this,

1) First, setup a liability account to track the loan balance.

2) Next, create a check from the company's bank account to the owner (you can use a check even if it was an electronic transfer). Use the loan account as the 'expense' account in the detail area of the check.

That's it!

Later, when the owner makes a payment on the loan, record that as a deposit and also use the loan liability account as the offsetting account.

If you'll be charging interest on the loan, periodically enter the interest in the loan's register so that it increases the balance, which will be income to the company.

B

bvj

If the cash being loaned to the shareholder is an asset prior to the loan, doesn't it remain asset after the loan? And likewise an asset account would be used to track the loan? And upon each payment made back to the company/lender, the loan account (asset) is reduced, and the cash account (asset) is increased. Thus the combined asset value never changes notwithstanding the related interest income. For interest, an income account would be created to track the interest portion of each payment where the remaining principal is applied to the aforementioned asset accounts. I'm asking because you mentioned a liability account to track the loan. But wouldn't the liability be the borrower's liability, and not the lender's liability?