I know this isn't the question but I'm going to show you how to do a bank loan first as sure that it will come up (and it answers the heading if not the real question).
For long term loans you need to divide the capital between that which will be repaid within 12 months and that which will be paid after 12 months (Capital apportionment only, Interest is expensed)
When I handle loans I journal all of the transfers up front as the last day of the year.
So, lets take £12k as a bank loan amount
Dr Bank £12k
Cr Creditors: Bank Loans > 1 year £12k
At each period end move the estimated capital repayments for the following period to creditors : Bank Loans < 1 year
i.e
Dr Creditors: Bank Loans > 1 year £2400
Cr Creditors: Bank Loans < 1 year £2400
On a monthly basis pay capital and interest (assume £80 pcm interest)
Cr Bank: £280
Dr Creditors: Bank Loans < 1 year £200
Dr Expenses: Interest Bank £80
At the end of the period Bank Loans < 1 year should be down to zero (may require an adjustment to the transferred amount in light of actual rather than calculated interest) and then another chunk gets transferred in from bank loans > 1 year.
As I say, I set up all of the transfers from the moment the loan is established so there is no risk of forgetting to do a transfer.
For the case that you are looking at where its not an official loan but rather an overdraft with a person then personally I would set the person up as a bank and run it like an overdraft. Similar in some ways to the way that you do with petty cash or PayPal.
HTH,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
