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Bookkeeping – Loan to the business by owner – How to record in the accounts
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Published on Thursday, 01 September 2022 11:45
Client asked: At the start of my business, I deposited $2000 of my own money as a loan to the business bank account, and want to know how to record this in the accounts. Later, I want to pay my $2000 back at some stage (when business has made the money back). How do I register or properly deposit $2000 into my cheque account and then later on, how do I reimburse myself?
How to record Loan to the business: Set up a new account in the Current Liabilities area 2-XXXX and call it “Pete’s (Your Name) Loan Account”, if intended to pay back in 12 months. However, if it’s to be a number of years before payback, we usually use an Equity or Long Term Liability account, such as Shareholder Loan or Director Loan Account. There may already be an account in your Chart of Accounts.
Set the type (in Current Liability) as credit card in MYOB/Xero, or choose Credit Card Account Type in Reckon/ former Quickbooks. Or Xero
Then, using Spend Money (MYOB/Xero) or Credit Card Charges (Reckon/Quickbooks) use the new account 2-XXXX as the “bank” to spend from at the top of the transaction window, and the business bank account at the lower account allocation. Use NO Tax code or BAS excluded or Out of Scope codes. Save/Record.
How to pay yourself back: When you repay/reimburse yourself use Spend Money, from the business bank account, and allocate back to the new 2-XXXX account and that will be reduced by the amount paid back to you. You actually pay it back to your personal account in reality on the bank.
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