Loan granted to a company to be repaid in the future without interest.

Luna1383 · ‎November 26, 2024

We work with several companies, and one of them requires a loan from us. I found some previous questions related to this topic, but I still have doubts.

When our company provides a loan to another company, how should we account for this loan? Should a journal entry be created, and if so, how should it be recorded? What accounting accounts should be used?

Would it be correct to issue a check for the loan and record it using the following accounts:

Debit: Loan Receivable $850
Credit: Bank $850

And when the loan is repaid, to record the deposit as:

Debit: Bank $900
Credit: Loan Receivable $850
Service fee $50 (income)

We are not charging interest, nor are there any set repayment terms. The other company will repay the loan when it is able to. We are only charging a service fee of $50 for providing the loan, on top of the $850 loaned amount.

Could you please confirm if the method I plan to use for accounting is correct, or advise how it should be done? I am using QuickBooks Desktop 2021.

Thank you for your assistance.

FishingForAnswers · ‎November 27, 2024

@Luna1383 If you are issuing the loan by way of a check written to the other company, it would be best to use the Write Checks feature instead of a GJE. Simply set the Loan Receivable account as the account under the Expenses tab to establish the opening balance of the loan.

As far as how to set up the loan item itself, use the Other Current Asset type if you expect to be paid back within a year and the Other Asset type if you expect it to take longer than a year.

You could use a GJE to recognize the paybacks, but it would work just as well to use the Make Deposits window, setting the Loan Receivable and Service Fee accounts in the From Account column.

It's generally best to use the established functions within QB as opposed to GJEs; GJEs are best used when nothing else will work. This is due to some limitations in the way QB sources its reports.

View solution in original post

FishingForAnswers · ‎November 27, 2024

@Luna1383 If you are issuing the loan by way of a check written to the other company, it would be best to use the Write Checks feature instead of a GJE. Simply set the Loan Receivable account as the account under the Expenses tab to establish the opening balance of the loan.

As far as how to set up the loan item itself, use the Other Current Asset type if you expect to be paid back within a year and the Other Asset type if you expect it to take longer than a year.

You could use a GJE to recognize the paybacks, but it would work just as well to use the Make Deposits window, setting the Loan Receivable and Service Fee accounts in the From Account column.

It's generally best to use the established functions within QB as opposed to GJEs; GJEs are best used when nothing else will work. This is due to some limitations in the way QB sources its reports.

Topics

Training

Community

Resources

Loan granted to a company to be repaid in the future without interest.

Loan granted to a company to be repaid in the future without interest.

Loan granted to a company to be repaid in the future without interest.

Re: Recording loan repayment from bank feed by directly categorizing into loan (set up as liabili...

Auto Loan from Personal Funds QB Desktop

Quickbooks Loans and Credit

How do you match a loan payment transfer from one account to a loan principal and interest payment in your loan account?

Setting up simple-interest loan accounts

Need to get in touch?