Accounting & Bookkeeping & Small Business Forum

[michele52]

I'm starting a new business and would like to know how to set up the necessary accounts to record a loan to this business from my home equity credit line. I'll be making monthly interest payments on the HECL for awhile and then paying off the principal later.

I've entered the opening balance in the business checking account, but haven't yet recorded where the money came from.

The HECL is in a separate "company" I've set up for my personal finances. How should I record the transactions in both places?

I've used Quickbooks for years in my graphic design business, but am pretty weak on bookkeeping, having had only one semester of training about 40 years ago.

Thanks,
Michele

[stasia2003]

michele52 wrote: I'm starting a new business and would like to know how to set up the necessary accounts to record a loan to this business from my home equity credit line. I'll be making monthly interest payments on the HECL for awhile and then paying off the principal later.

I've entered the opening balance in the business checking account, but haven't yet recorded where the money came from.

The HECL is in a separate "company" I've set up for my personal finances. How should I record the transactions in both places?

I've used Quickbooks for years in my graphic design business, but am pretty weak on bookkeeping, having had only one semester of training about 40 years ago.

Thanks,
Michele

In your business QB file, you're going to set the loan up as a long term liability and you call it "Business Loan". Under your personal QB file, you will set it up as a "Other Asset" and call the account "Notes Receivables".

[michele52]

Thanks Stasia,

When I make an interest or principal payment, do I use the same accounts?

Thanks,
Michele

[stasia2003]

michele52 wrote: Thanks Stasia,

When I make an interest or principal payment, do I use the same accounts?

Thanks,
Michele

When you record a payment and/or interest, just write a check and choose the loan account as your second entry and/or interest expense.

[michele52]

Thanks a bunch!

[Richard Noot]

stasia2003 wrote: michele52 wrote: Thanks Stasia,

When I make an interest or principal payment, do I use the same accounts?

Thanks,
Michele

When you record a payment and/or interest, just write a check and choose the loan account as your second entry and/or interest expense.

For this to work the loan amount should be set aside in a separate account. All payments must come the business account Only. If any payments directly or indirectly come from a personal checking account it could prevent the interest expense from being tax deductible which in return would affect the proper recording in the co books. (a tax deductible business expense woukd become a non deductible personal expense.)

[michele52]

Thanks for the additional detail.

[michele52]

I need a bit more help, please.

In my personal company, the HECL account is called, let's say, ABC Bank.

In my new company file, I have to make the interest payment out to somebody, so do I enter ABC Bank again and call it a long term liability account and then tie it to an "interest expense" account?

What do I do next in the personal company?

As you can see, I have absolutely no bookkeeping knowledge. If someone would show me the transactions to make in both the personal and company files, for where the money came from and how it's paid back, I'd really appreciate it.

Thanks,
Michele