Loans Between You and Your Company
How to record money you lend to the company, money it lends to you, and repayments.
A loan is money that must be paid back. It is different from a contribution (money you put in for good) or a draw (money you take out for good). Before recording a loan, agree on the terms in writing, even if it is a simple document.
You lend money to the company
- When the money arrives in the company account, open the transaction in Transactions.
- Set the Category to Loans Payable. The company now owes you this amount, and it appears as a liability on the Balance Sheet.
- Add a Description, such as "Loan from Maria, see agreement of Oct 1".
- When the company pays you back, categorize the repayment (money out) as Loans Payable too. The balance goes down.
The company lends money to you
- Categorize the money leaving the company as Loans Receivable. It appears as an asset: you owe it to the company.
- When you pay it back, categorize the incoming money as Loans Receivable.
Loans from a bank or lender
Categorize the money received and the repayments of the principal as Loans Payable. Interest paid is an expense; ask your accountant which category to use, or add one in Chart of Accounts (see Chart of Accounts, Users and Settings).
Not sure if it is a loan or a contribution? Ask your accountant before you record it. It changes how the money is taxed.