Deducting amount from a supplier invoice to repay a loan

SamC14 · ‎October 05, 2020

I have made a loan to a subcontractor, lets say £500. We have agreed that I will deduct £250 from his invoices over the next 2 weeks in order to repay the loan.

Lets say he invoices for £1,000, I will pay £750. There will be £250 showing as an outstanding payment. How do I allocate this £250 to the loan account?

I still need to show the £1,000 expense in my sub contractor COS account, and I need to show the loan account being cleared down by £250.

Thanks!

Jovychris_A · ‎October 05, 2020

I appreciate the details a lot, @SamC14.

Let me share some insights on how to record this transaction in QuickBooks.

Firstly, you can create an account to track the loan the sub-contractor loan.

Here's how:

Go to the Gear icon at the top, then Chart of Accounts.
Click New.
Set the Account Type to either Other Current Assets.
Choose Loans to Others in the Detail Type drop-down.
Add a recognizable name like Sub-Contractor Loan-[Lastname].
Select Save and close without entering an opening balance.

Then you can create a journal entry to establish the opening balance of the loan and then create credit in Account Payables for that subcontractor. You can then apply the credit to the expense.

Here's how:

Select + New.
Select Journal Entry.
On the first line, add the subcontractor loan account in the Account field, then the loan amount in the debit field.
On the second line, add the Accounts Payable account in the Account field, then the subcontractor's name in the Name field.
Select Save and close.

Also, to make sure that your assigning accounts accurately, I'd suggest consulting your accountant for professional advice.

Feel free to reach us again if you need further assistance. I'll keep my notifications open. Take care!

View solution in original post

Jovychris_A · ‎October 05, 2020

I appreciate the details a lot, @SamC14.

Let me share some insights on how to record this transaction in QuickBooks.

Firstly, you can create an account to track the loan the sub-contractor loan.

Here's how:

Go to the Gear icon at the top, then Chart of Accounts.
Click New.
Set the Account Type to either Other Current Assets.
Choose Loans to Others in the Detail Type drop-down.
Add a recognizable name like Sub-Contractor Loan-[Lastname].
Select Save and close without entering an opening balance.

Then you can create a journal entry to establish the opening balance of the loan and then create credit in Account Payables for that subcontractor. You can then apply the credit to the expense.

Here's how:

Select + New.
Select Journal Entry.
On the first line, add the subcontractor loan account in the Account field, then the loan amount in the debit field.
On the second line, add the Accounts Payable account in the Account field, then the subcontractor's name in the Name field.
Select Save and close.

Also, to make sure that your assigning accounts accurately, I'd suggest consulting your accountant for professional advice.

Feel free to reach us again if you need further assistance. I'll keep my notifications open. Take care!

SamC14 · ‎October 06, 2020

Thank you Jovychris_A

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Deducting amount from a supplier invoice to repay a loan