QuickBooks Accounting Software - Lending / Loaning Money

Usually people are borrowing money INTO their company - but there are times that your business (or you as a person) are lending money OUT to someone. Let's say your nephew needs money for college, so you agree to loan him money to help him through that challenge. Or say your business wants to help out a client, and your business loans them money to help them get started. How do you record these loans in QuickBooks?

The key is that your loan is an *asset*. This is money that you have sort of in an 'external bank account' that will come back to you in a slow, measured way. So you put it in as an "Other Asset" in your chart of accounts. It's not an expense because the money is only temporarily away from you.

Repayments will come in to a bank account probably. But you need to take account for that money reducing the asset's value back to zero. So you assign the incoming money as relating to the asset category. This ensures the asset decreases over time, working its way back down to zero.

Handling Barters for Loan Repayment
Let's say the loan is not always repaid in cash. Sometimes it is repaid in services - like raking the lawn or so on. That is considered a "barter".

So first, you need a barter account to handle this. Create a new "bank" in your chart of accounts and call it "barter".

Second, you need a payment type. Go into Item List - New Item - and create a Payment. Call it Barter Services and have it deposit to Barter.

Now, I tried ALL sorts of combinations here, using information on the web. I tried making invoices. I tried making bank checks. It never ended up having the barter account end up at zero - and having the loan equity asset DECREASING. Usually either the loan asset account would INCREASE in value and / or the barter bank account would have money stuck in it.

So in the end what I do is I open up the Barter account. I make one entry with the loanee's name as a vendor (someone who I am paying). I put in a deposit into the bank account, coming from the loan account. This is my payment for those services. I am releasing owed loan money into the Barter account.

Then, on the next line I create a second entry this time with the loanee's name as a customer (someone who pays me). In this one I put a *payment* of the exact same amount, and the account it goes to is my Personal Income account. This is the part I'm unsure of.

Because there is a matching payment and deposit for the exact same amount, the Barter account ends up zeroing out.

Because the money is paid FROM the "loan asset", the loan asset decreases properly by the amount indicated.

And, technically, I am "paying out to" of my personal income, which is the only part I am confused by. What else could that money "go to"? My "Retained earnings"?

I want to note here that I am not an accountant, so if someone is doing this for tax reasons, they should always talk with their accountant

QuickBooks Techniques
QuickBooks QIF to IIF
QuickBooks Cleanup
QuickBooks Other Names Entries
Quickbooks Removing an Obsolete Asset
Quickbooks Estimated Quarterly Taxes
Quickbooks IRA Payments
Quickbooks Opening Bal Equity
Quickbooks Lending / Loaning Money
Quickbooks Retained Earnings

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