Accounting for loan payoff/how to increase owner's equity?

SarahO

Hi - Need a little help with this one:

I started using Wave in Jan of '18.
I used a 0% APR balance transfer from a bank credit card in 2017, and reflected it as a business loan as follows:
I created a journal entry in 1/1/18 showing the withdrawal from credit card bank, under the category "Owner/Investment Drawings".

As I continued to payoff the loan, payments were reflected as transfers from my checking account to credit card bank.

Now it is fully paid off. My checking account correctly reflects the payments. The credit card bank correctly reflects a zero balance.
But "Owner/Investment Drawings" needs an entry to reflect the elimination of the original 1/1/18 entry. What would that journal entry be?

Or, is there another way I should've recorded the original "loan"?

Thanks,
Sarah

Mikeg

Sarah,
When an owner contributes a liability to a business it is a decrease in equity. So it sounds correct. The question becomes prior to contributing the debt to the business what were the loan proceeds used for? If was to pay business expenses or acquire assets then a journal entry would be needed. That transaction should be dated in the appropriate year. Since you mention 1/1/18, I assuming the proceeds purchased items in 2017 which would not be an expense for 2018. Further questions, please feel free to contact me at 443-851-4054.
Mike G, CPA
www.mgfinancial.net
Better Service - Better Pricing

SarahO

Hi Mike,
Thank you! Yes, I entered a tx for 1/1/18 to reflect the starting bal for the credit card balance as of that date, which is when I started using Wave.

Much appreciated.

Sarah