How do I account for building improvement construction loan?

MakingCentsBookkeeping · ‎November 06, 2020

I have a client that has purchased a building, they will be making some improvements on the building. I am unsure how to correctly record the construction draws during the remodel phase. My thought is to add a fixed asset account for the Construction draws and then offset that when the building is done to the fixed asset building account. If that is correct how do I account for the loan on the liability side?

ZackE · ‎November 06, 2020

Hi there, MakingCentsBookkeeping. Thanks for reaching out to the Community.

You can set up a liability account to record a loan and its payments. This will also track what's owed.

Here's how:
1. Use your Gear (⚙️) icon and choose Chart of Accounts.
2. Click New.
3. In the Account Type ▼ drop-down, pick Long Term Liabilities or Other Current Liabilities.
4. From your Detail Type ▼ menu, hit Notes Payable.
5. Give the account a relevant name.
6. Specify when your client wants to start tracking their money using the ▼ drop-down menu.

Choose Today if the account you're tracking is new as of today. In your Account Balance field, enter its current balance.
Pick Other if this account was started on another date. In your Select a date field, input the date you want to initiate tracking. Use your Account Balance field to specify the balance.

7. Enter the full loan amount as a negative number.
8. Select Save and close.

Once your liability account is configured properly, you can proceed with recording the money and repayments.

I've included a couple resources about working with loans that may come in handy moving forward:

Please feel more than welcome in posting a reply if there's any other questions. Have a wonderful day!

View solution in original post

ZackE · ‎November 06, 2020

Hi there, MakingCentsBookkeeping. Thanks for reaching out to the Community.

You can set up a liability account to record a loan and its payments. This will also track what's owed.

Here's how:
1. Use your Gear (⚙️) icon and choose Chart of Accounts.
2. Click New.
3. In the Account Type ▼ drop-down, pick Long Term Liabilities or Other Current Liabilities.
4. From your Detail Type ▼ menu, hit Notes Payable.
5. Give the account a relevant name.
6. Specify when your client wants to start tracking their money using the ▼ drop-down menu.

Choose Today if the account you're tracking is new as of today. In your Account Balance field, enter its current balance.
Pick Other if this account was started on another date. In your Select a date field, input the date you want to initiate tracking. Use your Account Balance field to specify the balance.

7. Enter the full loan amount as a negative number.
8. Select Save and close.

Once your liability account is configured properly, you can proceed with recording the money and repayments.

I've included a couple resources about working with loans that may come in handy moving forward:

Please feel more than welcome in posting a reply if there's any other questions. Have a wonderful day!

remme0115 · ‎January 06, 2021

I have a construction loan for building improvements but receive draws. Me and my business partner also put money into our bank account for expenses not reimbursed by the construction loan. How do I record the money from the draws and the expenses I pay and then get reimbursed from the draw?

MonicaM3 · ‎January 06, 2021

Hey @remme0115,

Thanks for reaching out to the QuickBooks Community. It sounds like you have a lot going on. To ensure that all of the transactions are tracked properly, I recommend getting in touch with your accountant. They can categorize all of the ins and outs correctly so that, come tax time, all of the reports are accurate.

Let me know if you have any other questions, or if I can help in any additional way. I’ll be here!

Topics

Training

Community

Resources

How do I account for building improvement construction loan?