I'm pretty much done with a set of accounts in QB. Only thing bugging me is im trying to post the interest from the loans to an expense account so it can be used in the profit and loss statement. Ive tryed using journal entrys to post them correctly, but it takes it out of the loan account, and doesn't post it to the interest expense account... Am i doing somthing wrong?
I really cant figure it out... then again it is near enough midnight!... lol
I don't use QuickBooks - haven't done since I was subjected to it about ten years ago and decided it was a horrible piece of software - but the obvious guess is that if you're only seeing one side of the journal in the two accounts in question (loan account and not the interest account), then have you perhaps accidentally posted the 'missing' side somewhere else?
Don't forget: the basis of this work is double-entry, and while that is sometimes not obvious when using accounts software it is still how the accounts software works - always remember the words of that famous historical bookkeeper, Sir Isaac Newton*, who's Third Law of Bookkeeping states that for every debit there is a credit. Which means that if the interest has been moved from the loan account, it must have gone somewhere else.
* Okay, this bit might be a slight stretch of the truth.
__________________
Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
Well this is it. i posted to the journal DR loan interest (exp acc) and CR Loan capital. Now to me that should be easy enough but the software dosn't like it...
I posted each payment of the loan on a monthly basis from the bank to the loan account using the journal. Now i thought that posting to three accounts, Cr Bank, Dr Loan cap, Dr Loan int would work... but its a complicated loan and i only have the total interest and capital for the year. Meaning i couldn't post interest on a monthly basis. (which in hind sight may have been easier...)
Now i dont know what to do.. :/
(surely it shouldn't matter if its QB or sage or VT... they all work on same princlples dont they?)
I make a payment from the bank to the loan account for the full amount then do a journal from the loan account to the Interest Expense account for the amount of interest. Is that what you are trying to do?
If you go to the Chart of Accounts, look up Loan Account and open that up you will see where the payments from your journal are going.
When you say you have done a journal to Cr Bank, Dr Loan cap, Dr Loan int .....you created this in "Company - Make General journal entries" , posted the entries to the relevant accounts and clicked Save & Close?
If you go to the COA and double click on the Loan interest account is the payment there?
Pauline, I didn't do a 3 entry journal posting as i didn't have the amount of interest as there has been complications with the loan.
This is how I've done everything so far: (all journal entries) Business loan bought into new business as old one was closed down and transformed into new entity; Dr share capital account, Cr Loan capital (note at this point this INCLUDES interest)
Making monthly payments; Dr Loan capital, Cr Bank
END OF YEAR: Wanting to move interest out of capital; Dr Loan Capital, Cr Loan interest. (now this is where i come unstuck.... expense accounts are supposed to be Dr balances... What am i doing wrong...)
As a result the expense is showing a negative balance on the P&L and adding the interest back in rather than subtracting it!
I'm going mad over this, is there something im missing? :(
I agree with Ruth. You need to Dr Loan interest and Cr Loan capital. When you had the opening balance of the loan, that would have been the balance on the loan at the start of the year (interest and capital). During the year you have been making payments to the loan by CR bank and DR Loan capital. I assume this monthly payment would have been part capital repayment and part interest, but the whole payment has gone to reducing the Loan capital account, when only the capital part of it should have done. Therefore you now need to put this interest back onto the loan by Dr Loan interest and Cr Loan capital.
Take a simple example:-
Loan balance at start of year £10,000
Payments total during year £500 (CR bank DR loan capital)
So you will now have a total of CR Loan capital £9,500
But only £200 of this £500 should have been attributed to the Loan capital account and the remaining £300 was interest, so you now need to add the interest back to the Loan capital account by:-
CR Loan capital and
DR Loan interest.
I have attached some T accounts to show this.
Hope this helps. It does take some getting your head round!
Ok thanks Pauline, I think i have this nailed now! :)
Only issue i have now... is the balance on the loan capital account doesn't agree with the statements that he has received from the loan company, does this matter?
Well strictly speaking I suppose they should be the same yes. Can you get hold of the statements to do a reconciliation? You may need to find out how much of the payment is capital repayment and how much is interest. Interest is usually calculated on a daily basis and the amount will depend on the date the payment was made. (Unless it's a fixed amount of interest each month). The loan company may also have added or subtracted something that you don't know about.
Right I have got to the bottom of this..... Turns out i was adding the interest onto the bal b/f figure.
I needed to use the capital ONLY, and then CR the interest in at the end of the year (and Dr the interest exp account) to give me the ACTUAL bal C/f figure for the next year.
Turns out you dont learn this thing when studying... just how to treat a loan... oh the things you learn when you talk to an accounant... hey at least thats an 1hr i can add to me CPD! lol
Its SUCH a weight off my mind i tell you... I thought i was going mad! Then one simple explanation from an accountant friend sorted it in under 10 minutes....
Like i said this sort of thing you dont get shown/taught to do unless you actually DO it. Suppose it like driving a car, you only learnt to drive AFTER you passed your test and realise how many muppets are out there on the roads! lol
