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Hi there, @lwyche-ffl-gmail.
I'm here to help you categorize your transactions in QBSE. In that way, you'll be able to know what areas of your self-employed business have the biggest impact.
You just need to identify if the transaction is for personal income or business income. It will be included in your estimated tax if that's for business income. Then, if you want to exclude it, select personal income. Here's how:
For more information about categorizing transactions, I suggest checking this article: Categorize transactions in QBSE.
To ensure that you'll be able to organize your transactions properly, I'd recommend checking the different categories below that you can use in the system:
The Community is always open if you have other questions about categorizing transactions. I'll be around to help. Wishing you a great day ahead!
A construction draw is a liability since you owe it to the lender. Set up a liability account for the loan, then deposit the draw into your bank account and assign it to the new liability account. That will put the funds in your bank account and record a corresponding amount as a liability due to your lender.
How do you record the draws received from the bank for the loan
Hey there, @eregalado.
I'd like to know what product you are using. So I'll be able to provide the proper steps for recording the draw in your QuickBooks account.
Please don't hesitate to share them in this thread. I'm more than happy to guide you along the way. Take care.
Quickbooks Desktop for Contractors
Thanks for joining in the thread, @Dr_Kinu. I have all the steps to help you track loans in QuickBooks Desktop (QBDT).
You'll first have to set up a liability account to record your loan and its payment. I'll guide you on how:
Then, create a new vendor for the bank or company you need to pay for the loan:
After that, create an expense account so you can track interest payments or charges:
Now that you have a liability account for the loan, you can record the loan amount. You can proceed to step 4 in this article which details the process: Manually track loans in QuickBooks Desktop.
Moreover, if you want to keep track of your loans and be reminded about upcoming payments, you can track and manage your loans with the QuickBooks Loan Manager.
We're all ears if you have further clarifications about the process. Feel free to leave a reply below and we'll get back to you.
How do I setup line items for an invoice to take out a construction loan draw? Each line item is currently going to "construction income" HOWEVER we know it is NOT income but a liability. What is your recommendation? Go back and change each line item or should I do a JE to correct it in the system? I am using QB Premier Contractor edition.
Hello there, @Dr_Kinu. I'm here to share information on how you can proceed with your construction loan draw.
Using a liability account when creating an invoice in QuickBooks Desktop (QBDT) is not recommended, as it may lead to inaccuracies and confusion in your financial records. If you have the accountant tool in your QuickBooks Premier software, you can use the Reclassify Transactions tool to identify and fix any transactions assigned to the wrong accounts or classes in your books.
On the other hand, if you do not have the accountant tool available, you can still fix these errors by doing a Journal Entry. However, it's always best to consult an accountant for guidance on completing this process.
I'm adding this helpful article on how to personalize your reports: Customize reports in QuickBooks Desktop.
Let me know if you have other queries about your construction loans. I'm here to provide you with assistance. Have a good day.
Was the draw deposited to your bank account? If so, create a deposit (Banking > Make Deposits) and assign your loan payable liability account to the deposit. Delete the invoice that incorrectly recorded the draw as income.
So should I be using the Bill feature to obtain a draw instead of an invoice? Because right now the invoices are inflating the owners income. What's the best approach to provide documentation to the bank for draw? Use another app for an invoice then record it (the draw or deposit) in QB? I need to be able to track what I'm billing for is why the invoice was so important. I'm open for suggestions.
"I need to be able to track what I'm billing for is why the invoice was so important."
That statement is confusing. Is it possible you're confusing invoices (what you use to bill your customers) and bills (what you use to record your purchases)? From an accounting standpoint, there is no connection between the draw (loan) and your customer billing (invoices).
"Because right now the invoices are inflating the owners income."
Yes, that's the purpose of an invoice. The confusion is why you're using an invoice to record a draw. That's not what an invoice is used for. Use a deposit if the draw is being deposited into your bank account.
"What's the best approach to provide documentation to the bank for draw? Use another app for an invoice then record it (the draw or deposit) in QB?"
When you get a loan, you generally only have to document how you spent the loan proceeds. Again, I think you may be confusing invoices with bills. If you want to track how you're spending the loan proceeds, create a Tag called "Loan Spend" or something similar and add that tag to the bills/expenses/check transactions that were paid for with the loan proceeds. You can then run a Transaction List by Tag Group report to see all of the transactions.
We use invoices for draws to show self performed work with lien waivers, sub contractors invoices, and other proof of expenses. Maybe I worded wrong, I know the difference between an invoice and a bill. Currently, we use invoices to request draws for reimbursement of our expenses. But the line items for the invoices are coded to construction income, which we know that the draw is not income, but that's the way the company is doing it and I'm trying to find a better way to do things. Each bank have their own way of doing things but all of the banks I'm working with accept the self performed invoices with the draw request. But the way the line items for the invoice are set up, it's going to income causing the owner's income to be inflated because the draw is not income. I'm simply using the invoices to show the expense for each line item of work we already performed. Any suggestions?
Ahh, OK, got it. Now I understand. My apologies if my response sounded patronizing.
All you need to do is code each line item on the invoice to your draw account liability instead of income. That will increase the loan payable liability balance and A/R by the same amount when you issue the invoice. Then, when you receive the funds from the lender, you can receive payment on the invoice which will increase your bank account and reduce A/R by the payment amount.
YASSSSSS!!!!! THAT'S THE ANSWER I HAVE BEEN LOOKING FOR!!!! THANK YOU SO MUCH!!!
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