Business Loan HELP!

[Maf. King]

Hi Kathy,

IANAA, an in the UK. So my reply is based on my own experiences...

On Thursday 23 Jun 2005 22:09, Kathy wrote:
> Hi,
> We just got a loan for our small business.   I set it up as a liability
> account, with a transfer of funds to my checking account so I can write
> checks on the account balance.   How do I properly enter the information in
> the  liability account so that these expenses will show up in the proper
> categories for tax purposes. 

Unless you get "more loan" for specific expenses, then the liability account 
shouldn't change after your initial drawdown to your checking account.  What 
I mean is that if you have been loaned $1000, and all that has been 
transferred to checking, then no matter how you spend that money, the loan 
liability is still $1000, and only changes (decreases) when you make a 
repayment.

> I tried, for example, $800 
>  for building repairs,  but it doesn't show up at all in the tax report. 
> When I deduct it from the checking account it will enter it in the proper
> places for tax purposes,

I would say that that is correct.  The money is a transfer from checking -> 
expenses:building repair.  meaning that your $1000 is now split as $800 spent 
on repairs, and $200 still cash at bank.

> but i can't seem to figure out how to keep track 
> of it in liabilities.

If you actually want to see how you have spent the loan money, then I can 
think of 2 easy ways to do this. (I'm sure there are more...)
1. Set up a sub-account under checking, to which you transfer the loan money 
and then spend it again.  When you reconcile your bank statements, remember 
to "include sub-accounts"!  That way, your liability remains as the total 
loan, and you can see at a glance how much is left to spend in the "pot" 
within your checking account.

2. For the initial transfer of loan money, use a split transaction - so that 
in the loan account you will see a transaction something like:  
(comment | transfer account | sum)

Total loan amount  | liabilty:loan  |+ 1000
repairs   |  checking  |    - 800
spare cash | checking | - 200

then if you bought something for $150, you edit the split and get:

Total loan amount  | liabilty:loan  |+ 1000
repairs   |  checking  |    - 800
new widget | checking | -150
spare cash | checking | - 50

etc. etc.

Hope that helps
Maf.