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Fouad
Level 2

Owner's equity

Hi all,

I set up a Ltd. company with loan from dad and recorded that as a loan from dad. He has no interest/ownership in the Company whatsoever.

The question is, can I record the sum of loan as Owner's Equity?

Solved
Best answer October 15, 2021

Accepted Solutions
EmmaM
QuickBooks Team

Owner's equity

Hello Fouad, Yes if it is being paid back over longer than 12 months. Yes, you can click on the edit on the owner's equity chart of account within accounting>chart of accounts>the drop-down next to account history and it should allow you to enter that balance. If not you can go to the +new in the top left>journal entry.

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6 REPLIES 6
John C
QuickBooks Team

Owner's equity

Hi Foaud Thanks for reaching out to us here on the Community. Is the loan from your dad to be paid back by your company?

Fouad
Level 2

Owner's equity

Yes it will be paid back by the Company.

John C
QuickBooks Team

Owner's equity

Hi Fouad As you're paying the loan back it would be classed as a liability and we recommend that you follow the steps below: 

select accounting > chart of accounts > new > account type will be current liabilities, if the amount is to be paid back within 12 months, if not  Non current liabilities> in the detail type select current liabilities, if the amount is to be paid back within 12 months, if not long term borrowings > enter a name e.g. Dad's loan > save and close. When you receive the amount into your account from your dad you will: create a bank deposit; select New+ > bank deposit > in the account field in the top left ensure you have selected the bank that the amount was received to and the corresponding date in the date field > within the 'add funds to this deposit' section, in the account column select the liability account you set up above and in the amount column enter the amount that was received > in the amounts are field select No VAT. This will increase the amount in the liability account. When you pay the amount back, or a proportion to your dad/it is deducted from your account you will: create an expense; select the New+ icon > expense > you don't have to enter any details in the payee field > in the payment account select the bank account the amount is being paid from > in the date field select the date the amount was debited from your account > in the category column enter the liability account you created earlier > enter the amount of the loan in the amount column > in the amounts are field select No VAT > save and close. This will reduce the amount in the liability account.

Fouad
Level 2

Owner's equity

Thanks a lot for your reply John.

So this loan will be recorded as a long term liability.

Doesn't this sum also equate to my equity in Company (i.e. Owner's Equity) as this was 100% of amount funding capital investment?

If yes, Owner's Equity is currently showing as 0, I'll need to amend that won't I?

EmmaM
QuickBooks Team

Owner's equity

Hello Fouad, Yes if it is being paid back over longer than 12 months. Yes, you can click on the edit on the owner's equity chart of account within accounting>chart of accounts>the drop-down next to account history and it should allow you to enter that balance. If not you can go to the +new in the top left>journal entry.

Fouad
Level 2

Owner's equity

Thanks Emma. You were extremely helpful.

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