How do I correct my CEBA entry to reflect the taxable income?

Hi Vince

I found this great description from the CIBC (https://www.cibc.com/content/dam/personal_banking/advice_centre/tax-savings/ceba-tax-en.pdf), quoting the relevant part:

• The CRA has indicated that the amount that is forgivable is taxable in the year that the loan is received.
  For instance, if a business receives a $40,000 CEBA loan in 2020, $10,000 must be included in income
  in 2020. Alternatively, a business could elect to not include the $10,000 in income, and instead to reduce $10,000 of non-deferable operational expenses in respect of which the CEBA loan was received.
  $10,000 of non-deferable operational expenses in respect of which the CEBA loan was received.

Upon recording the initial loan, you are to assume that you will repay the loan within the designated timeline and record the forgiveable portion (10,000) as revenue instead of the loan, or as a reduction on expenses.

Probably the easiest way to do this is as follows:

Record a deposit to your bank account in the total of the $40,000, consisting of 

• Loan (Liability): $30,000
• Extraordinary Revenue: $10,000

Because this 'revenue' is a non-recurring item, associated with something other than the mainline of your business, creating and recording it as an extraordinary item will show it 'below the line' (under gross profit) and not muck up your normal income on your profit and loss.

Hope this helps!

Thanks for the suggestion.  In fact, I was thinking along the same lines as you. 

However, I was having a casual conversation with an accountant friend (who has not needed to touch CEBA) and he was suggesting that by doing it this way, it does not capture the full liability which is really the $40,000. Although I have all the confidence in paying back the $30,000, the question arose about what happens if I don't? How do I add $10,000 back to the loan liability? Or is this a case of "cross that bridge when you get there"? 

Right now, by doing it your suggested (and my original thought) way will show that my liability is only $30,000 and the $10,000 is assumed forgiven in 2020.  Does that make sense? Is that ok? If not ok, how do I make it right in QBO?

Thanks for your help.  Your explanation/confirmation puts me as ease!

Happy to help Vince! Good luck in your bookkeeping adventures!