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LEIATUII
Level 2

Directors Loan Journal Entries

Hello,

 

Hope someone can help in the right direction here as I'm a bit of novice when it comes to accounting. I recently setup QBO for my new business and made a startup loan to the company as a Directors Loan. I went through the below process.

 

1. Setup Directors Loan account as Current Liabilities and Loan Payable.

2. I made journal entries as follow:

- Line 1, chose 'Directors Loan' account and entered the loan amount in Debits.

- Line 2, chose 'Opening balance equity' account and entered the loan amount in Credits. 

 

Now when I run a balance sheet report, current liabilities for Directors Loan is showing 0.00 but the loan amount shows correctly in Opening balance equity under total shareholders' equity section. Why is this? And is this correct? Shouldn't the the Directors Loan be showing the loan amount outstanding as it is a liability due in the next 12 months?

 

Thanks 

Solved
Best answer September 14, 2020

Best Answers
Ken - Product Champion
Content Creator

Directors Loan Journal Entries

Hello Leiatuii,

 

Thanks for getting back to us. While I cannot provide specific accounting advice, I might just ask if you can take a look at the movement of funds between the bank feed transaction and the journal entry you have created. Perhaps Step 2 of this guide would be of assistance.

 

Depending on which of the two transactions is the most correct representation of the Director's loan and the subsequent funds that it generated, you can determine which of the two transactions you will need to remove.

 

-Ken

View solution in original post

4 Comments
Ken - Product Champion
Content Creator

Directors Loan Journal Entries

Hello Leiatuii,

 

Thank you for getting in touch. Using a journal entry to represent the opening balance of an account is a common method of doing so.

 

However, based on the description you have provided it does seem odd that the loan account has a $0 balance while the opening balance equity account shows correctly. To begin with, I would recommend checking the Director's Loan account history, to check for any additional transactions that may be conflicting with your opening balance journal entry:

  1. Select Accounting from the left menu, then Chart of Accounts
  2. Find the Director's Loan account
  3. Select Account History

Checking the history of transactions may be useful in determining what the issue lies. For more information on recording loans in QuickBooks Online, I have provided a guide here.

 

If the above steps do not identify where the issue lies, I would recommend reaching out to our support team for more information:

  1. Log into QuickBooks Online
  2. Select Help in the top-right corner
  3. Select Contact Us

-Ken

LEIATUII
Level 2

Directors Loan Journal Entries

Hi Ken,

 

Thank you for your reply. I followed your instructions and found a transaction entry which credited the loan amount from the Business Bank Account to the Directors Loan Account. This must have happened when I was reviewing transaction feeds from the Business Bank Account. The loan was deposited directly into the Business Bank Account, so an entry is required to balance things up. However, given that the loan was originally entered into the Opening Balance Equity Account, can you suggest how I should go about correcting the entries so everything is correct? Thanks

Ken - Product Champion
Content Creator

Directors Loan Journal Entries

Hello Leiatuii,

 

Thanks for getting back to us. While I cannot provide specific accounting advice, I might just ask if you can take a look at the movement of funds between the bank feed transaction and the journal entry you have created. Perhaps Step 2 of this guide would be of assistance.

 

Depending on which of the two transactions is the most correct representation of the Director's loan and the subsequent funds that it generated, you can determine which of the two transactions you will need to remove.

 

-Ken

View solution in original post

LEIATUII
Level 2

Directors Loan Journal Entries

Thanks Ken and all good!