How to account for an owner's loan?

System

This discussion was created from comments split from: Cash on hand to the bank.

Fixation

Please assist. When we started the business, the owner transferred money to an E-Wallet and we withdrew the cash from the ATM. How do I show this as an owner loan, and then the invoices paid cash ...... later on, we opened a bank account.

Alexia

Hi, @Fixation.

I made your post into its own discussion since it felt like it's own question to me.

If this is an owner's investment (which would mean that the owner isn't expecting to be repaid, or doesn't really want to track the exact amount), you could simply make it an income transaction using Cash on Hands as the account, and "Owner's Investments/Drawing" as the category

If this is a loan that the owner expects to have repaid in full, you'll have to start by creating a liability account on your Chart of Accounts. Choose Loan or Line of Credit as the account type. Once that's done, go to your transactions page and create a journal transaction that credits that liability account for the amount of the loan, and debits Cash on Hands. When you make a payment on that loan, create another journal entry that credits the Asset Account you're paying that loan out of (presumably your business' bank account) and debits the loan account.

Let me know if you have any questions!