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Hello everyone. I am new to the forum.
We lent our personal money to our company to purchase a business van. Please advise how we need to record the director loan to the business and the purchase of the van? And also how to record transactons when the company start paying money back to us in each month?
Thanks in advance.
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July 2018 - last edited July 2018
Hi @Pickachiu - welcome to the Community Forum !
For the loan, create an account under Current Liabilities - something like "2-xxxxx - Vehicle Loan from [Pickatchui]". Then prepare a receipt in Banking - Receive Money and allocate the loan amount (principal) to that account, with tax code N-T.
For repayments, create another account under Current Liabilities, called "2-yyyy - Vehicle Loan Repayments Clearing" - also with tax code N-T. When making the monthly repayments, allocate the payment to this account.
Then before the end of the financial year, have your tax accountant review the loan and the repayments made.
He/she will give you a journal entry, to split the repayments between the interest and principal portions.
If you give him online access as an Advisor, he can enter the journal for you.
Strongly recommended -> contact your tax accountant first.
Kym Yeoward CPA & CC
We run a different system than Kym whereby the loan account is setup as a Credit Card type. in a formal loan where the interest is known and needs to be accounted for, we create an Unexpired Interest on Loan account immediately below the loan. This is populated by a Spend Money from the loan to Unexpired
The bill is paid from the Loan Account and the repayments are made bank to loan acc.
Thanks for the advise.
So if I used your method, there will be 2 liabilites account but basically they are offseting each other? When they balance out, that when the loan is paid off?
Can you please provide further instruction on " create an Unexpired Interest on Loan account immediately below the loan. This is populated by a Spend Money from the loan to Unexpired.
The bill is paid from the Loan Account and the repayments are made bank to loan acc"