Construction Draw

When you secure a construction loan, barring any initial advance, the starting liability is ZERO. Each draw as a bank deposit or transfer is an increase in the loan balance. Debit Banking, Credit Loan.

Then when you cut a check it is to expense or asset (Work In Progress), depending on what you are building. Generally, you want WIP so that once the job is complete you transfer the ending WIP asset to a full Fixed Asset for depreciation (which cannot start prior to job finish)

If the bank pays your subs directly from the draw (or counter checks go to them and no money passes into your checking) then you would want to ADD a cash clearing bank type account to record the movement of funds into WIP

Thanks, for he help.

I dont understand what you mean by add a Cash Clearing Bank Type Account. What would you call this account?

what's a cash clear account?

I'd be delighted to share information about the cash clearing account, tammylynn82.

The mentioned account type is used to move your money from one account to another when you're unable to transfer the fund directly. It is also known as a Barter or Wash Account.

Normally, it has a balance of $0.00 because you always take out the same amount that you put in. You can utilize the clearing account to manage customers and Accounts Receivable (AR), move an account from one Account Payable (AP) to another AP, and write off a receivable against a payable, to name a few.

For more details about the common uses of the account, including the instructions to create the category, see the following guide: Set up a clearing account.

You can also save the Community link in your browser for future use. There, you'll find articles and answers to your accounting questions, as well as the resources you need to take your firm to the next level.

Feel free to leave a comment below if you have other account-related concerns or questions about QuickBooks. I'll get back to make sure you're taken care of, tammylynn82.

Appreciate your help!

if I have 7 different construction loans should I make different liability accts for each?