Hello MBS121,
I'm not sure if you have this figured out by now, but I'll answer with what we do for anyone that may be interested. If I understand you right, the Owner paid money out of pocket to a third party for a loan, and when the loan is paid back, he wants it to go to the company as an Owner investment to Capital? If so, here's how I would handle it.
1 - Make a JE that debits "Notes Receivable". This is a "Other Asset". And Credit the Owner's Equity just as you described.
2- Make an Amortization Schedule in excel for the monthly payments that will be coming back showing the principle and interest each month. This will be a worksheet that can be updated each month as payments are made.
3 - There are two ways to receive the payments as they come in each month. A - Create an invoice to the party receiving the loan. Code the principle amount to the "Notes Receivable" Asset, and the interest portion to Interest Income. When the payment is received, receive it against the invoice and deposit it. B- Skip the invoicing and when a check comes in, code the deposit the same way as the invoice would have been.
I like to do the invoice so I can track if the payment is late and remind the party if they fall behind.
Let me know if this was not the answer you were looking for.
