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Level 1

Customer Payment: "Deposit To" option will not allow "Long Term Liability" account

Before the end of the year I made some last minute check deposits (payments from a customer) to my business before taking off for vacation. Just now, when reviewing the deposit receipt, I realized that the deposits were made to my personal checking account instead of my business checking account as I had requested. My business and personal accounts are different but within the same bank, To correct this I thought I could just update the Customer Payment "Deposit To" drop-down to "Long term liability" but unfortunately, I can only add a "Bank" account or "Other current asset" account. As this took place in last year, I am fine as just recording this to the "Long term liability" account that I have set up for personal loans that I have made to my contracting company, but I am not sure how to do this, and still record that the services have been paid for by the customer.

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Best answer 01-14-2019

Accepted Solutions
Level 12

Re: Customer Payment: "Deposit To" option will not allow "Long Term Liability" account

Lets start with why you have Long Term Liability when it usually whould be Owner Contribution. If you are an LLC or Sole Proprietor then you never "loaned" money to your company, all you did was increase equity.

 

You must therefore be a C or S corporation (with yourself as an employee collecting what the IRS calls reasonable wage before any distributions)

 

Deposits can only be recorded to bank type accounts or Other Current Asset type accounts. So you can add a clearing bank account, record the deposit to it and then post a withdrawal to Shareholder Loan, which this would be. It is a two-step process.  Or you could transfer the money back into business checking from the clearing account

 

Company money that is misdirected into personal account would not be a company liability since that check amount would be owed back to the company, making it an asset.

 

 

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Level 1

Re: Customer Payment: "Deposit To" option will not allow "Long Term Liability" account

Got it. Thanks John. Yes it is an S - Corp. (sorry forgot to mention that). I figured that there was an accounting reason. So if I understand you correctly - 1. Create clearing account, 2. Add funds to clearing bank account, 3. Transfer funds to "Shareholder Loan". Thanks.

View solution in original post

2 Comments
Level 12

Re: Customer Payment: "Deposit To" option will not allow "Long Term Liability" account

Lets start with why you have Long Term Liability when it usually whould be Owner Contribution. If you are an LLC or Sole Proprietor then you never "loaned" money to your company, all you did was increase equity.

 

You must therefore be a C or S corporation (with yourself as an employee collecting what the IRS calls reasonable wage before any distributions)

 

Deposits can only be recorded to bank type accounts or Other Current Asset type accounts. So you can add a clearing bank account, record the deposit to it and then post a withdrawal to Shareholder Loan, which this would be. It is a two-step process.  Or you could transfer the money back into business checking from the clearing account

 

Company money that is misdirected into personal account would not be a company liability since that check amount would be owed back to the company, making it an asset.

 

 

View solution in original post

Level 1

Re: Customer Payment: "Deposit To" option will not allow "Long Term Liability" account

Got it. Thanks John. Yes it is an S - Corp. (sorry forgot to mention that). I figured that there was an accounting reason. So if I understand you correctly - 1. Create clearing account, 2. Add funds to clearing bank account, 3. Transfer funds to "Shareholder Loan". Thanks.

View solution in original post

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