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Join nowHi everyone,
Here is my situation: my previous bookkeeper recorded a journal entry like this in 2018 Debit $80K member distribution and credit $80K Loan to ABC company. Then in this year, we received back the total outstanding balance of the loan $80K without interest. My supervisor recorded the received payment as bank deposit. Now here is the question, I need to write the check for member distribution $50k to the members but the journal entry back in 2018 already did that. I know that something is wrong with the previous journal entry but I cannot find out where is wrong. Please guide me to solve the problems. Thanks in advance.
Solved! Go to Solution.
Is ABC one of the members? It would not have been a loan, just draw. To loan money you need to pay out money and tge original JE did not affect your company banking. In fact as i see it you essentially loaned one of tge member's equity to ABC. ABC should repay the loaning member equity, which in turn would be deposited.
A deposit (addition to banking) does not happen in a vacuum. Some account had to be the opposite. Newton's Laws. Debit banking = Credit income, new loan to you, or repayment of a current asset loann out on your books
The journal entry in 2018 should have been debit loan as current asset and credit a check paid out. By posting the loan as a credit your company BORROWED from ABC, instead of loaning to. In essence you increased member equity at same time instead of distributing it.
Is ABC one of the members? It would not have been a loan, just draw. To loan money you need to pay out money and tge original JE did not affect your company banking. In fact as i see it you essentially loaned one of tge member's equity to ABC. ABC should repay the loaning member equity, which in turn would be deposited.
A deposit (addition to banking) does not happen in a vacuum. Some account had to be the opposite. Newton's Laws. Debit banking = Credit income, new loan to you, or repayment of a current asset loann out on your books
The journal entry in 2018 should have been debit loan as current asset and credit a check paid out. By posting the loan as a credit your company BORROWED from ABC, instead of loaning to. In essence you increased member equity at same time instead of distributing it.
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