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The owner of the S-corp company took out a line of credit. The money was deposited into our company bank account, then transferred to his personal bank account. He wants to start making payments back to the bank for the loan. How do I set up this type of loan?
Hi Melissa,
Firstly the loan amount would be transferred into a Current/Non Current Liability account (depending on how long the owner expects it to take to pay back - if less than a year it should be placed in current'). When the payments are made these should also be transferred to the same account, thus reducing the liability.
I hope this makes sense.
If you have any other questions please do not hesitate to private message me.
Kind Regards,
Emily
Hello Emily,
Thank you so much. Just another question you might can help with. So I am setting up the account for the other current liability loan ( it will be paid off within a year). I guess I am confused on how to properly set up the loan to record it accurately.
So, the single owner of the company borrowed from Company's line of credit. The bank deposited into our company bank account, then withdrew it to deposit into the owner's personal account. The owner wants me to start making payments on the loan from business bank account to the loan with the same bank.
Not sure how to show the deposit from bank into our bank account than debited back out to the owner for reconcilation purposes.
Right now on Chart of accounts I have Other Current Liabilities, but not sure if the detail type is Line of Credit or Loan payable.
Thanks so much :)
Melissa
Hi Melissa,
I am glad that I could help.
So the bank depositing the money into your business bank account is to be transferred to the current liability account for the loan you have created. When the owner withdrew the amount from the company the loan amount this should be a transferred to Directors Current Account. When you make the payment from the business bank account to the loan account you can trasfer this money to the current liabilty loan account. Effectively the drawing from the director out of the bank account is entirely seperate and they will still owe this money until they deposit the money they owe to the business back into the business current account.
It will be Loan Payable. I hope this makes sense.
Kind Regards,
Emily
Okay Emily I am so sorry to bug you again! LOL. I have been putting off entering this but now I have to reconcile the bank account so I have to deal with it.
So i have set up a current liability account for the Line of Credit Loan. Do I put a starting balance in it? Or do I create a "check" and put the # as ACH from Integrity Bank (just the name of the bank not tied to an account) into the actual Integrity Bank account for the $240,000 and use the line of credit account I created as the the account under account details and enter $240K?
Now- I dont' have the owner's personal bank account created as a chart of account in my QB to show the transfer from Integrity Bank account to his personal bank account. Or would I just use the Owner's draw account I already have set up and not create his personal bank account as a chart of accounts.
He wants me to start making payments of $22K a month to Integrity. So will that come out of the company's money to Integrity Since it was a line of credit borrowed from company?
And for the owner's payment back to company that will stay as owner's liability loan till he pays the company back. The only loan to reduce liability to the line of credit is the company's payment to the line of credit account correct?
Do I list the owner's withdrawl from the company for the $240K as an owner's draw? then when he pays it back owner's equity account will reduce the draw?
Sorry to ask so many questions :)
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