DESKTOP EDITION CLOUD EDITION SERVER EDITION GUIDES FORUM

How do I log money that i borrowed and payed back?


#1

I borrow some of my pay in advance and pay it back at the start of the next month when I get payed. under what can I log this?


#2

The answer will depend on both the organizational/legal structure of the company and your status. Is the company a corporation, sole proprietorship, partnership, or what? And are you an owner, an employee, or something else?


#3

I am the owner, working as a manager for the company. It’s a small business registered under sole prop…


#4

You will want to check with your local accountant for details related to local law. Basically, though, as a sole proprietor, you are not an employee of the company. All profits and losses of the company belong to you and any money you take out of the company is a draw.

My main question is why take money out and pay it back? If the money is available, you can take it and don’t have to pay it back. If, later, you need more operating capital and need to put money in (for example, if you go through a slow sales period), that is just another capital contribution.

To take money out, Spend Money from one of your accounts. Allocate the transaction to owner’s equity. Likewise, when putting money in, Receive Money into an account and allocate to owner’s equity.


#5

Thing is, I like to spend money, so to limit this, I take a salary every month and sometimes I use more than my salary. So I basically treat myself as a employee and everything more than my salary is owed my be to the business.


#6

So effectively you gave yourself a bonus. This is fine from an accounting point of view. If you then decide to bring money back into the company you effectively do a capital contribution, as Tut mentioned. Again this is fine. From your point of view these two mutations are related, but from an accounting point of view they are separate. You may decide on a capital contribution any time you like, or you can take money out as much as you like. One does not have consequences for the other.

But if you want to log this (i think this was the original question): one easy method may be to create and use a separate expense account?


#7

I would disagree with @jorisb about using an expense account. A withdrawal of equity for personal use is not an expense of the company and should not be recorded in an expense account, because that will affect the P&L statement. Likewise, a contribution to equity is not revenue. Otherwise, @jorisb’s comments are correct.