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Xero/Reckon/MYOB - Bookkeeping entries for loans – Lending money to business

images/Loan Money to the Business.pngA regular client emailed to check they had entered a transaction correctly - lending money to pay business expenses - in this case, to cover a PAYG payment to the Australian Tax Office (ATO) – they emailed –

"I am a little unsure about an entry I have made and wonder if you can tell me if I have done correctly.

I had a PAYG for Chris and at the time there wasn’t quite enough funds in Bus. a/c so I transferred money from personal a/c to cover.

For MYOB entry I put to..              Receive Money

Payer:  C and  personal

Amount: $ ----- 

Method:  Other – then put note in details.

Memo:  funds transfer from Pers. to Bus a/c

Then I credited  

21410 - PAYG Tax    which is where the payment will come from

is this correct or should I have put to something else?

Kind regards, L"

Answer –

Good effort – nearly right!

There are 2 transactions to do, just to be clear (and a third one to pay it back later) -

1              You lend money to Business Bank account –

a.     Receive Money

                                          i.    Top account is Bus bank account, then date, $ etc

                                         ii.    Memo – eg “C&L loan to Bus bank”

                                        iii.    Lower account is YOUR Personal Loan account – either a number 2 Liability (Long Term), or Equity – but number 2 and set as a CREDIT CARD allows you to use in other Transactions like a bank account at the top account

2              The Business PAYS the PAYG –

a.     Spend Money

                                          i.    Top account is Bus bank account, then date, $ etc

                                         ii.    Memo – eg “Pay ATO PAYG” – add name if specifically matches an employee amount

                                        iii.    Lower account is the 2-1410 PAYG Tax account

3              The Business pays you back – if this occurs later (or can just leave as is and business always owes you this later)

a.     Spend Money

                                          i.    Top account is Bus bank account, then date, $ etc

                                         ii.    Memo – eg “Pay ATO PAYG” – add name if specifically matches an employee amount

                                        iii.    Lower account is the 2 Liability Personal Loan Account

Hope that is clear!

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Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software
Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software
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