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Reconciling Auto Loan payments from personal account

SouthlandOutdoorSouthlandOutdoor Member Posts: 17

We have a vehicle that was originally purchased prior to starting the business. Once the business started, it was used for the business. I have transferred the remainder amount of the loan at the time of starting the business. Some payments are being made directly from the business account while some payments are still being made from a personal account. Having a really hard time getting the account to reconcile because of this. This is also not allowing me to categorize interest paid because I cannot start a transaction from Owner Investment/Drawing category. Please help.

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  • SocorroIS_071218SocorroIS_071218 Member Posts: 7

    Hi,
    The asset and the repayments you made from your personal account can be converted to equity.
    Contact us info@socorroservices.com , for better understanding of your situation and suitable solutions the problem

  • Kristian_GKristian_G Member Posts: 56 admin

    Hey @SouthlandOutdoor!

    First thing I'm going to do is include a couple of links to some invaluable resources in regards to accounting for loans, and handling business expenses with personal accounts. If you haven't already read through these articles, that would be the first thing I suggest you do.

    From what you said in your post, it sounds like you've already read both of these but thought I'd include them right off the bat just in case.

    As for your questions, it sounds like you're trying to account for payments towards your loan from both your Personal Wave account, and your Business' Wave account, depending on where the funds are coming from — which is great. Let's go through an example of how this should work and then you can confirm whether or not this is how you've been doing things.

    But before we get into that, I do want to preface this by saying that I am not an accountant. As a result, questions of this nature should always be double checked/discussed with a trained/licensed CPA.

    For this example let's pretend that you're making a $100 payment (total) towards your auto loan, and let's say that $75 is the principal amount, and the remaining $25 is interest. Let's also pretend that this $100 payment has come from your personal account, and that the loan we are paying towards is a business liability. Here's how you would record this in Wave:

    1. Head to your Personal account's Accounting > Transactions page and click 'add expense.'
    2. Name the expense something like "auto loan payment" (or whatever you want really), and select the "Owner's Investment/Drawings" option for the account, and enter $100 for the amount and click save.
    3. Head to your Business account's Accounting > Transactions page and click 'add expense.'
    4. Name the expense the same thing as before, and again select the "Owner's Investment/Drawings" option for the account, and enter $100 as the amount and click save.

    At this point, you are done the personal/business expense portion; now for the loan bit...

    1. Create a journal transaction on your Business account's Accounting > Transactions page.
    2. Name the journal transactions "auto loan payment" (or again, whatever you like).
    3. Debit the auto loan liability account $75.
    4. Debit the interest expense account $25.
    5. Credit the Owner's Investment/Drawings account $100 (if you made this payment from your business' bank account, you would credit the business' bank account here, instead of the Owner's Investment/Drawings account).

    At this point, you should have a $100 expense in your personal account, a $100 expense in your business' account (from your personal funds), a $75 loan repayment, and a $25 interest payment.

    Lastly, these kinds of transactions shouldn't effect your reconciliation too much, as the Owner's Investment/Drawing account is an Equity account, and should therefore not appear on your Accounting > Reconciliation page (as this would only be for asset/bank accounts, not equity accounts).

  • magicwillmagicwill Member Posts: 37 ✭✭

    Hello,
    I'm an accountant of 30+ years experience and Wave Pro adviser since 2013. The explanation from Kristian_G, is more wordy and convoluted that needed. Whenever you pay a business expense from personal funds, the only proper way to record that is via a journal entry. The debit side of the entry will be the appropriate expense/liability account(s) and the credit side will be Owner's Investment/Drawings.

    I have a couple follow-up questions. How did you go about getting the loan balance on the books? The same thing for the value of the vehicle at the time it was placed in service? Are you currently depreciating the vehicle properly?

    If you don't know the correct answers to the above questions I strongly encourage you to contact me ASAP.

  • SouthlandOutdoorSouthlandOutdoor Member Posts: 17
    @magicwill
    I made a journal entry of the balance still owed when the vehicle started service.
  • magicwillmagicwill Member Posts: 37 ✭✭

    How did you get the vehicle on the books? And what were the debit and credit accounts for the JE you posted?

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