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Our Corp borrowed $250K and I used a JE with credit to loan account, debit to (a bank account). Spent the $ for various things for the Corp. Now I'm JEing for paying the $ back. I debit the loan acct, is the offset account RE?
I'm not understanding. The original $ is gone, it was a $250K loan from the owner that I tracked as "Loan from Owner". If I simply debit a bank account, there is no way to track the funds the Corp owes him. He also pays himself interest...so I have to track the amount and time he loans himself $.
For clarity: I have two QBs...in one I track Corp $, in another I track personal funds for tax purposes. So $ that Owner loans the Corp, I can't just Deposit because I need to keep track of what $ came from the Owner...hence, the JE. Then, that (original) Owner $, was spent on Corp expenses. NOW the Owner has taken $250K out of another CORP account to pay back the $ he borrowed, from himself. I have to account for the fact that the $ has been paid back, so I have to credit the loan account...but how?
I'm taking a Quickbooks course this month, but until then, I'm having to teach myself. I hope I was clear enough.
First off, TY for the info, much appreciated. Second, it is a C-Corp, one owner/shareholder. His brother is a CPA and tells him what he can and can't do. I am going to have to log off and do some legal work, but I'll be back with DETAILS if you are still able to help later, I would be thrilled.
OK. It is a C-Corp, as I said. One shareholder/Prez,"P". I keep two separate QB, one is for personal, one is Corp. What happened was we needed $ to pay taxes at end of Corp year. I borrowed from a personal HELOC, $250K. I then used it to pay, among other things, a shareholder bonus, the Corp tax to IRS, and the tax on the bonus. The IRS got a bunch of $ that day. I originally did a JE with a debit to the Operating acct (here's the money coming in), and a credit to the account called "Loans from P", which keeps a running tab of what the Corp owes to P. How else can I keep track of the money P loans to the Corp? It seems that you don't want me to do a JE but I don't understand how I can just deposit money in an account without also explaining that it needs to be paid back. Can we start there? Maybe there is some better way to do this that I'm completely missing.
The next step was beginning to pay it back: we took $120K from a Corp MM account, and put it in the Operating acct in order to partially pay back the $250K HELOC loan. That was just a simple transfer. However, when I pay the HELOC $120K, my "Loans from P" account also needs to be reduced by $120K, since the Corp now only owes $130K to P. I have a feeling that I need to restructure accounts or something but I have no idea what it is.
Sorry it took so long to thank you properly for all the info. Some of it I already "knew" but the difference is intellectual knowledge doesn't always translate into actually doing it. I wanted to give you some feedback on what I did and why, because part of my problem was I don't always have the language I need to explain what I am trying to do...essentially, I needed to re-structure my accounts correctly. I had my "Loans from P" account separated from it's "offset" account ("Due from Owner") that kept up with personal bills that had been paid by the Corporation...so, lessening the total loan amount. That was ONE issue.
I did what you suggested, though, and used a deposit for the original $250K, then a check for the partial pay back. Once the "Due from Owner" account was properly structured as a sub-account of "Loans from P", it all fell into place. Of course this is all happening in my CORP QB.
ON THE OTHER SIDE (Personal QB), I did a transfer from the HELOC to the "Loans to Corp" liability account. Now my issue is the $120K that came from the Corporate MM. That account isn't anywhere in the personal QB. I'm not sure how to handle that. For now, I did (my favorite) a JE that credits the "Loans to Corp" account and debits the HELOC, with where it came (MM#) from in the memo line. What is the proper way to account for the Corp MM? It literally is Corporate money and I don't want it to show up in the Personal QB.
I didn't understand everything you said, esp about taxes but I printed it out as future reference. I'm doing a lot better than I was last year...haha...My skills are improving....
One more thing. I see where you said the "loan to the company is a Current Asset"...um, I'm only copying what folks before me did until I learn to do things correctly...are you saying that my current liability account that I am using, called "Loans to Corp" needs to actually be put in as an Asset? That makes more sense, obviously...the personal QB is a very old one and like I said, I just have been copying what was done before. Is there any reason loans out to other entities would be put in as liabilities? It does seem to me to be an Asset...
@Psrbusiness wrote:
One more thing. I see where you said the "loan to the company is a Current Asset"...um, I'm only copying what folks before me did until I learn to do things correctly...are you saying that my current liability account that I am using, called "Loans to Corp" needs to actually be put in as an Asset? That makes more sense, obviously...the personal QB is a very old one and like I said, I just have been copying what was done before. Is there any reason loans out to other entities would be put in as liabilities? It does seem to me to be an Asset...
IN the corporate company it is a liability. In the personal books it should be an asset. Any money the corporation borrows from any source is a liability - even corporate credit card is a liability. The owner of the debt instrument, usually a bank but in this case - "P" the owner, he holds an asset. Said asset might be pledged as collateral and since it is a HELOC it certainly is. Corporation has an obligation to pay P, not the bank even if funds are directly paid from corporate account to the HELOC.
In the personal books you have two "loans" to deal with. One is "Loans to corporation", which should be an asset and the other, if you were to track it, would be a liability - the HELOC, although you actually do not need to track it but pick upu the interest paid at tax time.
"I had my "Loans from P" account separated from it's "offset" account ("Due from Owner") that kept up with personal bills that had been paid by the Corporation...so, lessening the total loan amount. That was ONE issue."
It is bad enough, but not criminal, when a owner of a passthrough (sole proprietor or LLC) uses company funds to pay their bills but a C corp should never do so unless it is a tax deductible item still in name of individual. An example would be a company car lease where the owner's credit score is better than the corporation (or corp is too new to have a credit rating), then it is technically a personal bill paid by the corp. Otherwise no personal transactions should hit corporate books.
In corporate books the draft of money from the MM account is a credit to that account (think: c=check, d=deposit), reducing the loan from owner liability. In personal books the Loan to Corp (asset) is reduced by a credit while its offset is to debit the HELOC. Hence you would need the HELOC in the personal books to do it right
"a transfer from the HELOC to the "Loans to Corp" liability account." these are backwards. as the loan to corp is a personal asset and the HELOC is a personal liablity. If you were to run a personal balance sheet as it is set up the HELOC would be right alongside the value of the house - increasing its value, loans against property, HELOC or first mortgage reduce the current value of the property - just like car loans. A car is an asset of certain value but that may have a loan balance greater than today's market price
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