Adding loan from customer no cash deposit occurs

1

I have an unusual situation and not sure how to enter it in Manager.

When we started our business another family member who owns their own business and is our customer gave us an interest free business loan. We deposited the money in our business account and set up a liability account in manager. We then used it to purchase computers and programs to run our business. Repayment of the loan is by way of a 10% discount on every job we do for this customer. This is all working fine and there are no problems.

Forward to now and they have offered to send my husband to a 2 week school in Dallas so he can start doing larger jobs for them and they also bought a new and better computer program so he can do the larger jobs. All the costs of school (class fees, flight, hotel, per dium for food and taxies) were paid with the customers company credit card and the computer program was also paid the same way. All these charges will be added to the original loan we received from them and will continue to be paid back in the same manner by giving a 10% discount for each job we do for them.

I’m not sure how to enter the charges they are paying for with their charge since no money will be received by us in the business checking account but it is a loan we have to repay. Then once we have something recorded for the loan amounts how to designate everything to the right expense account (i.e. travel, computer program expenses, etc).

I thought possibly a journal entry and allocate on one line to the liability account and then add a line or create another journal entry to allocate the money added to the liability to the correct expense accounts.

Thanks for any guidance.

2

You are overthinking the situation. Go back to double-entry basics. You need debits and balancing credits. The debits are the expenses, which will go to travel, employee education, and (depending on cost and lifespan of the computer program) possibly fixed assets. Whereas the corresponding credits would normally be to a bank account, in this case they will be to the loan liability account.

Think of the loan liability account like a credit card. You financed expenses by borrowing money instead of spending your own. But eventually, you’ll give it all up in the form of discounts, which are foregone sales. This is the beauty of double-entry accounting: if it balances, you’re probably doing it correctly. :wink:

3

Thank you you’re right I was over thinking it. :slight_smile: I was making it harder than it is…but I have a tendency to do that.

Thanks again