Good day guys, please could anyone give me some advice?
I had someone giving me a loan that is repayable over a couple of months, The loan is to buy some much needed stock, but I am not sure how to enter this into the accounting system so I can remember to pay back the loan and some interest.
Do I add the funds to investments, vendor, client or what, and if I do enter it under owners investment, how do I transfer funds to main bank account and back for payments. Sorry for dumb question, but I never did attend the accounting class :-)
@profileweaver No accounting classes!? No way! Lol, just kidding. That's no problem and we're here to help!
It's a great question, actually! I've merged your post with the Help Center article discussion on accounting for loans in Wave. Essentially, to account for a loan, you would need to add a Liability Account in your Chart of Accounts and then add a journal transaction to debit your checking account and credit your Liability account. As you repay the loan, you would then debit your liability account and credit your checking account. For a step-by-step guide on this process, refer to the above Help Centre article. This article also walks you through accounting for the interest.
If you'd like to get a little more confidence in accounting and the principles behind them, I'd also recommend checking out our Fearless Accounting Guide! I've attached a pdf below. It definitely compensates for the accounting classroom time lots of us haven't had.
Do I have to apply the above method for each individual purchase and expense? Is there a better way to do it? May be in bulk?
We own 2 companies: Our company "A" and our company "B", which was recently incorporated. We've been recording most of our purchases of "B" in the books of "A", so in essence "A" has been loaning the money to "B".
Therefore, in "A"’s books any purchases made on behalf of the new company or any monies transferred from "A" into the new company’s bank account should be treated as a Loan Receivable from the new company on "A"’s books.
Then, in the new company’s books, I should record the expense, HST etc and record a Loan Payable to "A".
This is the solution our accountant gave us. The question is: How do I do all this in Wave? What's the best way to do it without disrupting or messing up our bookkeeping.
@Clau said:
Do I have to apply the above method for each individual purchase and expense? Is there a better way to do it? May be in bulk?
We own 2 companies: Our company "A" and our company "B", which was recently incorporated. We've been recording most of our purchases of "B" in the books of "A", so in essence "A" has been loaning the money to "B".
Therefore, in "A"’s books any purchases made on behalf of the new company or any monies transferred from "A" into the new company’s bank account should be treated as a Loan Receivable from the new company on "A"’s books.
Then, in the new company’s books, I should record the expense, HST etc and record a Loan Payable to "A".
This is the solution our accountant gave us. The question is: How do I do all this in Wave? What's the best way to do it without disrupting or messing up our bookkeeping.
Hi, if you have a look at your separate discussion post on this matter you'll see I've posted a response that may help.
There is usually a loan origination fee, in addition to the principal. For example:
Loan amount: $8,400.00
Loan fee: $503.00 (5.99% of the loan amount)
Total amount to be financed: $8,903.00
So I actually received $8400, which is accounted for as a bank transaction. But how do I account for the $503 that is part of the loan amount I owe?
Hello just wanting help getting step by step instructions on how to set up a loan that my company made to another company in wave, so now i need to set it up in wave. It needs to include interest as the company is making interest and principal payments now. I just don’t understand how you list the actual loan itself and then how do you apply payments towards it to reduce the principle but show interest as income?
@TMBHoldings I've merged your post with the Help Center article discussion on accounting for loans in Wave and I'll reiterate what I wrote above in this thread. Essentially, to account for a loan, you would need to add a Liability Account in your Chart of Accounts and then add a journal transaction to debit your checking account and credit your Liability account. As you repay the loan, you would then debit your liability account and credit your checking account. For a step-by-step guide on the process, check out the above Help Centre article: https://support.waveapps.com/hc/en-us/articles/360000041883-How-to-account-for-a-loan
This article also walks you through accounting for the interest!
I have:
1. Added a Liability Account (named it Loan from (personal name))
2. Added a journal entry which debits the cheque account and credits the Liability Account the whole amount of the loan
Now, do I need to DELETE the transaction that has been imported from my bank online? I can't merge the 2 transaction as one is a journal entry and one is a straight up credit to my bank account.
If you’ve connected your bank account to Wave, it will import the deposit transaction showing the loan funds available in your checking account. You’ve already accounted for this with the journal transaction you just created, so you can go ahead and delete the transactions when Wave imports it.
I will be receiving equity from a handful of investors - they will investing in a film project of mine. They will not receive interest but will get paid back according to a payment waterfall and if the film creates enough revenue, also a percentage of the net profit. How do I account for that? As a loan?
Hey @Mag! Accounting for this as a loan sounds like the best option. This thread has several instances of how to account for this, so I'd say have a read through and give it a shot!
I followed the instructions above and every month that I have paid has been applied as a DEBIT to the Loan Liability and CREDIT to the Checking account I am paying the loan from. What I do not notice is where are these payments reflected/deducted. When I deleted the imported bank transactions @PIP was mentioning my net profit went up by the same amount deleted. I created another Journal transaction and followed the same steps to test if my Net Profit was reduced and it does not. The loan balance does reduce. But shouldnt the money taken from the bank be deducted from my Net Profit otherwise I have a larger tax liability. Does this make sense?
Just wondering if you're manually creating the interest expense debit line on your journal transaction as it states in the article. Often times this is something that people forget to do when they believe the net payment brought in by their bank. Let me know if that helps.
Hi, so I have set up a truck loan (liability account, created a bill with the gst portion for truck, paid the bill from the loan money deposited to my account coded under vehicle maintenance and expenses (not sure how else I could claim the gst for the purchase). Lets see... I think I debited the checking account when set up. Journaled a bulk installment and the interest as shown above by crediting checking and debiting liabliity truck loan and interest expense. What do I do about the uncategorised expenses of the installment amounts? Gosh I hope I did this correctly. Such a lot to get your head around.
After I created the debits and credits follow by this instruction, both my checking and loan account received a journal transaction. The problem is that the checking account now received a positive entire loan amount which does not exist before. This is very confusing. Shouldn't it became an unpaid debit until I make payments?
Steph #5 in the article says "If you’ve connected your bank account to Wave, it will import the deposit transaction showing the loan funds available in your checking account. You’ve already accounted for this with the journal transaction you just created, so you can go ahead and delete the transactions when Wave imports it."
You can go ahead and delete this transaction since you've accounted for it in your JE.
Sorry, if I'm a bit confused about your process here, but you'd need to start by creating the journal transaction for the loan amount where you're debiting the Checking account, and crediting the Loan account for the amount of the loan.
Then for your loan repayments, create new journal transactions for each repayment doing the opposite and debiting your Loan account, and crediting the Checking account.
Anything brought in by your bank connection can be deleted since it's already accounted for in the JE's
The article is gone, can you post a link to a new one? did something change? It says:
Oops
The page you were looking for doesn't exist
You may have mistyped the address or the page may have moved
This guide is very easy to follow but yet very confusing because if this last statement (so you’ll debit your checking account and credit your newly created liability account with however much you have set aside for a loan). In my own case, I am getting the loan from and external source (a bank) and to pay with interest, so the loan amount is coming from an external source. How do I account for it in Wave?
Hey @cloudnus, if your loan is coming from an external source, then you just want to create a liability account and have the starting balance be that loan. It should still function in the same manner!
Thank you for the helpful advise- I have a loan from an external source (bank) and need to reflect the journal entry for the starting balance in the amount of the loan. What account will be debited? I understand that the Loan liability account is to be credited with the loan amount. Or is there a different way to reflect the starting balance?
I have done everything as per all instructions. Set up truck loan, made an installment payment plus accounted for interest. I read somewhere that in order to pay for the truck I needed to create a bill then pay for it from our account which was done. This is how I claimed gst on this purchase. It looks like these transactions have been deleted as per instructions regarding step 5. I have also created a truck asset so we can depreciate over time. Please let me know if I have made any mistakes. Thanks
Sandy
@Lizzy From one of the screenshots, you can see that for the starting balance of the loan, we debited the bank account and then credited liability account.
If the transaction comes from a bank account, you can either categorize it to the loan account to be the debit or you can recreate this as a journal transaction.
@SandyP Great q! For the bills, were you creating them as well as the loan repayment? If so, this would have been double counting and the journal transaction will be easier to see the breakdown of the loan payment. Your GST account will show up as a liability account so you can add an extra line to the journal transaction to account for this. I would consult a bookkeeper/accountant before you do this to make sure this is the best way to account for your GST!
The main difference between a loan and a line of credit is how you get the money and how and what you repay. A loan is a lump sum of money that is repaid over a fixed term, whereas a line of credit is a revolving account that let borrowers draw, repay and redraw from available funds. There are long term loans and short term loans which would likely be defined by the bank or loan provider.
Comments
Ahhhhh, thank you, @Barsin ! That makes sense.
Good day guys, please could anyone give me some advice?
I had someone giving me a loan that is repayable over a couple of months, The loan is to buy some much needed stock, but I am not sure how to enter this into the accounting system so I can remember to pay back the loan and some interest.
Do I add the funds to investments, vendor, client or what, and if I do enter it under owners investment, how do I transfer funds to main bank account and back for payments. Sorry for dumb question, but I never did attend the accounting class :-)
@profileweaver No accounting classes!? No way! Lol, just kidding. That's no problem and we're here to help!
It's a great question, actually! I've merged your post with the Help Center article discussion on accounting for loans in Wave. Essentially, to account for a loan, you would need to add a Liability Account in your Chart of Accounts and then add a journal transaction to debit your checking account and credit your Liability account. As you repay the loan, you would then debit your liability account and credit your checking account. For a step-by-step guide on this process, refer to the above Help Centre article. This article also walks you through accounting for the interest.
If you'd like to get a little more confidence in accounting and the principles behind them, I'd also recommend checking out our Fearless Accounting Guide! I've attached a pdf below. It definitely compensates for the accounting classroom time lots of us haven't had.
Thanx!
Do I have to apply the above method for each individual purchase and expense? Is there a better way to do it? May be in bulk?
We own 2 companies: Our company "A" and our company "B", which was recently incorporated. We've been recording most of our purchases of "B" in the books of "A", so in essence "A" has been loaning the money to "B".
Therefore, in "A"’s books any purchases made on behalf of the new company or any monies transferred from "A" into the new company’s bank account should be treated as a Loan Receivable from the new company on "A"’s books.
Then, in the new company’s books, I should record the expense, HST etc and record a Loan Payable to "A".
This is the solution our accountant gave us. The question is: How do I do all this in Wave? What's the best way to do it without disrupting or messing up our bookkeeping.
Hi, if you have a look at your separate discussion post on this matter you'll see I've posted a response that may help.
There is usually a loan origination fee, in addition to the principal. For example:
Loan amount: $8,400.00
Loan fee: $503.00 (5.99% of the loan amount)
Total amount to be financed: $8,903.00
So I actually received $8400, which is accounted for as a bank transaction. But how do I account for the $503 that is part of the loan amount I owe?
This post above was answered here!
https://community.waveapps.com/discussion/5592/how-to-account-for-loan-origination-fee
Hello just wanting help getting step by step instructions on how to set up a loan that my company made to another company in wave, so now i need to set it up in wave. It needs to include interest as the company is making interest and principal payments now. I just don’t understand how you list the actual loan itself and then how do you apply payments towards it to reduce the principle but show interest as income?
@TMBHoldings I've merged your post with the Help Center article discussion on accounting for loans in Wave and I'll reiterate what I wrote above in this thread.
Essentially, to account for a loan, you would need to add a Liability Account in your Chart of Accounts and then add a journal transaction to debit your checking account and credit your Liability account. As you repay the loan, you would then debit your liability account and credit your checking account. For a step-by-step guide on the process, check out the above Help Centre article: https://support.waveapps.com/hc/en-us/articles/360000041883-How-to-account-for-a-loan
This article also walks you through accounting for the interest!
I have:
1. Added a Liability Account (named it Loan from (personal name))
2. Added a journal entry which debits the cheque account and credits the Liability Account the whole amount of the loan
Now, do I need to DELETE the transaction that has been imported from my bank online? I can't merge the 2 transaction as one is a journal entry and one is a straight up credit to my bank account.
Thanks!
Hey there @Pip
Step five in this article mentions this:
https://support.waveapps.com/hc/en-us/articles/360000041883-How-to-account-for-a-loan
I will be receiving equity from a handful of investors - they will investing in a film project of mine. They will not receive interest but will get paid back according to a payment waterfall and if the film creates enough revenue, also a percentage of the net profit. How do I account for that? As a loan?
Hey @Mag! Accounting for this as a loan sounds like the best option. This thread has several instances of how to account for this, so I'd say have a read through and give it a shot!
Great article. Very helpful and insightful for a novice to accounting like me. (Biology is much easier)
I followed the instructions above and every month that I have paid has been applied as a DEBIT to the Loan Liability and CREDIT to the Checking account I am paying the loan from. What I do not notice is where are these payments reflected/deducted. When I deleted the imported bank transactions @PIP was mentioning my net profit went up by the same amount deleted. I created another Journal transaction and followed the same steps to test if my Net Profit was reduced and it does not. The loan balance does reduce. But shouldnt the money taken from the bank be deducted from my Net Profit otherwise I have a larger tax liability. Does this make sense?
Hey there @Saul_Q2019
Just wondering if you're manually creating the interest expense debit line on your journal transaction as it states in the article. Often times this is something that people forget to do when they believe the net payment brought in by their bank. Let me know if that helps.
Hi, so I have set up a truck loan (liability account, created a bill with the gst portion for truck, paid the bill from the loan money deposited to my account coded under vehicle maintenance and expenses (not sure how else I could claim the gst for the purchase). Lets see... I think I debited the checking account when set up. Journaled a bulk installment and the interest as shown above by crediting checking and debiting liabliity truck loan and interest expense. What do I do about the uncategorised expenses of the installment amounts? Gosh I hope I did this correctly. Such a lot to get your head around.
After I created the debits and credits follow by this instruction, both my checking and loan account received a journal transaction. The problem is that the checking account now received a positive entire loan amount which does not exist before. This is very confusing. Shouldn't it became an unpaid debit until I make payments?
Hey @SandyP
Steph #5 in the article says "If you’ve connected your bank account to Wave, it will import the deposit transaction showing the loan funds available in your checking account. You’ve already accounted for this with the journal transaction you just created, so you can go ahead and delete the transactions when Wave imports it."
You can go ahead and delete this transaction since you've accounted for it in your JE.
Hey @Lakey
Sorry, if I'm a bit confused about your process here, but you'd need to start by creating the journal transaction for the loan amount where you're debiting the Checking account, and crediting the Loan account for the amount of the loan.
Then for your loan repayments, create new journal transactions for each repayment doing the opposite and debiting your Loan account, and crediting the Checking account.
Anything brought in by your bank connection can be deleted since it's already accounted for in the JE's
The article is gone, can you post a link to a new one? did something change? It says:
Oops
The page you were looking for doesn't exist
You may have mistyped the address or the page may have moved
Hey there @GCMachinery1
Sorry about that. We've updated the article and it can be found here
https://support.waveapps.com/hc/en-us/articles/360000041883-How-to-account-for-a-loan-with-journal-transactions
Sorry about that!
This guide is very easy to follow but yet very confusing because if this last statement (so you’ll debit your checking account and credit your newly created liability account with however much you have set aside for a loan). In my own case, I am getting the loan from and external source (a bank) and to pay with interest, so the loan amount is coming from an external source. How do I account for it in Wave?
Hey @cloudnus, if your loan is coming from an external source, then you just want to create a liability account and have the starting balance be that loan. It should still function in the same manner!
Hi,
Thank you for the helpful advise- I have a loan from an external source (bank) and need to reflect the journal entry for the starting balance in the amount of the loan. What account will be debited? I understand that the Loan liability account is to be credited with the loan amount. Or is there a different way to reflect the starting balance?
Thanks!
I have done everything as per all instructions. Set up truck loan, made an installment payment plus accounted for interest. I read somewhere that in order to pay for the truck I needed to create a bill then pay for it from our account which was done. This is how I claimed gst on this purchase. It looks like these transactions have been deleted as per instructions regarding step 5. I have also created a truck asset so we can depreciate over time. Please let me know if I have made any mistakes. Thanks
Sandy
@Lizzy From one of the screenshots, you can see that for the starting balance of the loan, we debited the bank account and then credited liability account.
If the transaction comes from a bank account, you can either categorize it to the loan account to be the debit or you can recreate this as a journal transaction.
@SandyP Great q! For the bills, were you creating them as well as the loan repayment? If so, this would have been double counting and the journal transaction will be easier to see the breakdown of the loan payment. Your GST account will show up as a liability account so you can add an extra line to the journal transaction to account for this. I would consult a bookkeeper/accountant before you do this to make sure this is the best way to account for your GST!
What's the difference between loan and line of credit vs other short term loan in the chart of accounts? Can I use either one of these?
Hey there @ahmadsalehuddin
The main difference between a loan and a line of credit is how you get the money and how and what you repay. A loan is a lump sum of money that is repaid over a fixed term, whereas a line of credit is a revolving account that let borrowers draw, repay and redraw from available funds. There are long term loans and short term loans which would likely be defined by the bank or loan provider.