I need to understand how to account for grant money I received for my business. I put the Vendor as the organization that gave me the grant, but what category do I use?

create a liability account for the EIDL, use that account as the source account for the deposit.

If at the end of the year it is in fact income tax free, then use a journal entry to move the full amount to an Other income account called tax free income.  debit liability and credit tax free income

Hi,

Thanks for your answer, but I do have a follow up question.

This grant money that I won't have to pay back. So can you explain a little more about why to put it in a liability account? I though liability accounts were for things I had to pay back. Or is this just a holding place until the end of the year?

Assuming I do put it in a Liability account. 

If at the end of the year I do have to pay taxes on the non governmental grant I got. Do I need to move that money into an income account that will be taxed. That I name "other taxable income" or something like that.