How to track investments as a lender

mktinvest

Hello, I'm just starting out with Wave and would like to understand how to track investments where my company is the lender and expecting returns on future payments. The majority, if not all, of these loans/investments would be secured by collateral. Some payments back to me could be interest only with a balloon at the end while others would be combined principal and interest payments. I'm new to accounting and would be interested in what the best way to set this up may be from an asset/income standpoint?

Alexia

Hi, @mktinvest.

Before getting into it, allow me to welcome you to Wave, and to the Community! If you have time for it, we have an introduction thread here.

To create a loan that you are owed in Wave, you'll need to start by creating an Asset account for that loan. You can do this from the Chart of Accounts page, under Accounting. You'll want to add it under either Other Short-Term Asset, or Other Long-Term Asset. Call it "Loan receivable - Borrower's Name". You'll also need an income account called Interest.

Then, go to the Transactions page, and create an expense transaction from your bank account, categorized the loan you created.

Whenever you would add interest, create a journal transaction. To do this, click on More, on the top-right of the Transactions page, and choose "Add journal transaction". Debit the Loan Receivable account for that loan and credit the Interest income account from earlier, both for the amount of the interest charged.

When you get paid, just create an Income transaction on the Transaction page, using your bank account as the Account, and the appropriate Loan Receivable as your category.

Does this all make sense?

mktinvest

Thanks for the quick response @Alexia!

Ol_UncleAlpine

Great info!
G