Loan repayments

1

Hi, I’m hoping someone can point me in the direction of an example of how to account for a loan. There seems to be a mountain of information out there but I’m having trouble finding a clear example of how to deal with my situation which is quite simple.

I took out a long term bank loan to partially cover the purchase of my business. I also contributed on several occasions funds of my own to help with cashflow. In the suspense category I have the money for the loan transferred in, the sum I paid for the business transferred out and a number of loan repayments. This is for a company, not a sole trader.

2

From the link further below:

Suspense is a built-in account where Manager posts transactions it cannot properly resolve.

  • Many transaction fields in Manager default to Suspense until valid entries are made in them.
    Any balance in Suspense signals a problem. Never attempt to clear the Suspense account with a journal entry. That only hides problems and usually makes both your Balance Sheet and Profit and Loss Statement inaccurate. Problems that caused transactions to post to Suspense must be identified and corrected.

You must clear these accounts see Clear transactions in Suspense account | Manager

1 Like
3

You need to talk to your accountant about recording these transactions

You took out a loan to purchase the business - these has nothing to do with the company as it is loan you owe to the bank/loan provider

If you contributed funds to the business, then you have loaned money to the business, so the business has a liability for the amount you have loaned. This could be a loan or a capital contribution - but the exact details of these transaction will have to be discussed with your accountant.

There are many ways to account for these transactions.

Once it is clear what the different transactions represent, then you can come back and discuss how to record them in Manager

1 Like
4

Thanks eko, I do understand the requirement to clear the suspense entries but what I’m not clear about is what accounts the loan related transaction should be sent to. I have all of the other income and expense items taken care of, I just need some direction on how to set up an account(s) to cover loan repayments, incoming funds from the loan and outgoing funds for the purchase of the business.

5

Thanks Joe, will do.

6

It isn’t at all clear who took out the loan to buy the business - you or the business

7

I did.

8

Then the loan has nothing to do with the business

9

Ahhh yes, that one slipped by me. I have the repayments being deducted from the business account so I guess that would be documented as owners drawings yes? I figure the loan money put in the account by the bank would be documented as owners equity. I am the sole owner of the business, no other parties involved.

10

You need to get your accountants advice - you may be in danger of running foul of the tax authorities

3 Likes
11

No!! follow @Joe91 advise as you are in danger territory. No authority would ever allow an individual to use a business bank account to take a loan from the business to get ownership.

Your loan is not a business loan but a personal one that allows you to participate (get owner shares) in the business. The sooner you seek professional accounting advice the better.

12

According to your explanation:

  1. Borrowed money from a Bank: was the money borrowed on behalf of the company or as an individual?
  2. You funded the business from your personal resources. Was this a loan to the business?