QuickBooks Online Tutorial - How to Record Loans From One Company to Another

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Index
0:30 Definition of income vs a loan
1:08 Mistakes Seth sees when he sees loan recordings
2:16 We need to always visualize the books on what's expected to be seen
3:23 Record whole payment as principal, interest separate
4:10 Using the example 100k loan, record it in bank deposit
4:54 Check your balance sheet before saving transaction
5:29 100k going into the bank
5:46 Loan payable shown on balance sheet 100k
6:28 Template to record the loan, to get entries done
8:00 Record the payment out of the bank account
8:45 Check balance sheet to check work
9:07 Record journal entry, copy Seth's template for journal entry
10:07 Check the balance sheet again
10:32 Check the transaction report
10:45 View how interest increases balance
11:09 Running the profit and loss, to double check everything is correct
11:23 Create a journal entry dealing with the portion that was loaned
12:32 Real trick to having a loan recorded being bulletproof is
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[@debbieruss1802]

Thank you! Very good process and explanation, I go through this all the time with inter-comoany loans and it has been a pain, this gives me so much less headache :)

[@nerdenterprises]

Thank you Debbie!

[@IntelligentStockInvesting]

how do you deal with the loan interest

[@smlovejoy]

Acme...Wiley Coyote's favorite store. Thanks for this video!

[@nerdenterprises]

You bet! Thanks Shannon!

[@dawntutecky9925]

Thank you! That was painless.

[@HectorGarciaCPA]

Great stuff.

[@nerdenterprises]

Thank you Hector!

[@arnozegerman4139]

Thanks for the video. Good stuff. I have a slight variation that I am hoping you can help me with. What if I want to transfer a loan from a child company to its parent company. So effectively I'm wiping a loan of the books of the child company without any actual transfer of funds. Only thing I can think of is to record as "Other Revenue", but I don't want it to be recorded as taxable income since it's simply a transfer of liability within the company structure. Appreciate your help!

[@nerdenterprises]

Hi! And thanks! If this is a loan between the child and the parent, then it is debt forgiveness to the child = income, and a write-off to the parent = expense. So it's a wash on consolidation.

[@terryprice4625]

How do I record it on quickbooks desktop? I did what did and it doesnt balance out for the 2 separate companies?

[@mgillia2]

How do I record intercompany transactions for bank transfers in Quickbooks ?

[@amandamontecinos7776]

Is asking me for an invoice and won't let me see bank deposit

[@nerdenterprises]

Sorry, I can't really help you based on your comment. Need more information / context.

[@deborahholl9799]

Thank You!!!

[@frankayala3950]

Hi thank you for the explanation, but I'm a bit confused on the transaction to the receiver, shouldn't the receiver record it as a liability " loans intercompany payable"?

[@nerdenterprises]

Technically yes, but when dealing with intercompany loans it's helpful to categorize them both in the same place for comparability - it makes it easier to confirm that one's receivable is the other's liability. They should be the same amount, but one is positive and one is negative. Moreover since these are intercompany they can often flip one way or the other. Then you would have to reclassify the accounts on both sets of books from Asset to Liability and vice versa.

[@jaspermowatt323]

Helpful thank you. For a non-interest bearing Convertible note, would the process be the same except for For Hire inc. would be the note holder? Thank you

[@nerdenterprises]

Yes, unless the note is converted. Then you need a journal entry to reclassify the note. For the note holder (the one who is owed the money) it moves from a receivable to an Other Asset called, "Investment in ____ [name of company you now own an equity stake in]. For the borrower, the loan payable moves to the Equity section.

[@jaspermowatt323]

@@nerdenterprises Excellent, thank you

[@pearlivory3483]

Can I do this within ONE qbo file, for inter-department transfers? I've been struggling with this for months.

[@nerdenterprises]

You can use Locations for the departments. Then book each transaction that goes between departments in two parts. A check gets written from one account to the loan account. Then separately record a deposit to the other department's account to the loan account. When you run a standard balance sheet the loan account will be 0. But if you group it by location, it will break that loan account into the 2 departments. It's a little tricky, but it will work - the key is making sure that every one of these transactions is assigned a location. You could use classes, but locations work better for something like this.

[@terrysaracino2311]

Shouldn't these To/From accounts be reconciled? If so, what is the easiest way?

[@nerdenterprises]

As long as the amounts agree between the two companies then you are all good. If you want to do the reconciliation process, then you can enter in the amount that you feel is the correct balance due to / from the companies. Then you look at one company's account register for the intercompany loan and check off the amounts in the other company's reconciliation. If you run across a missing transaction on one side, enter it in the other and check it off. Then do this for the other company's corresponding intercompany loan account.

[@vijilkumarc.v1291]

Is it correct if it shows as a liability in target inc? Insted of current asset....

[@nerdenterprises]

Yes. With inter-company loans it can flip either way depending which way the money goes.

[@marcelas489]

Thanks Seth! Easy to understand! What will you do if a customer paid an invoice to wrong company bank? On the company A will add deposit to the intercompany asset account, but what about the company B to close out invoice with journal entry?

[@nerdenterprises]

I am not sure I follow what you mean when you say, "a customer paid an invoice to wrong company bank?" If a customer paid an invoice and the money was deposited into another companies account, then you treat it as a loan. For the company who SHOULD have gotten the money, you can receive payment and record the deposit, but then zero out the deposit with a negative amount and book that to the inter-company loan.

[@brandtcorpadministration6666]

@@nerdenterprises Can you please explain what you mean by "zero out the deposit with a negative amount and book that to the inter-company loan"? Thank you. PS - love your videos!

[@nerdenterprises]

@@brandtcorpadministration6666 Thank you! Add a line item with a negative amount (to reduce the deposit from the payment amount to $0). That negative amount gets booked to a Loan from (the company who got the money).

[@brandtcorpadministration6666]

@@nerdenterprises OK, I am using a Daily Sales Receipt to record my POS sales etc. I has a zero total b/c I'm offsetting "sales" with each form of tender. One of those forms of tender is actually run thru a sister company's credit card machine and initially is deposited into the sister company's checking account. Then the money is physically moved to the correct company's checking account. Would I somehow modify the Daily Sales Receipt or would I do a second transaction for that day to show that money is owed from the other company? For example. Company A's Daily Sales Receipt: Sales $100; Cash $25, Check $25, CC $50. The CC $50 is deposited into Company B's bank account. When the $25 cash and $25 check are deposited into Company A's bank account, those bank feed transactions match the Daily Sales Receipt entries, leaving the CC $50 unmatched and in undeposited funds. Is this undeposited funds transaction enough, or do I somehow need to get that $50 into Company A's Due To / From Account? I don't want to double-record the CC $50. Sorry for the long-winded question.. I just have myself confused on this one... Thank you.

[@nerdenterprises]

@@brandtcorpadministration6666 Let's get you set up with a 1:1 here --> new.nerdenterprises.com/QuickBooks-Online-Bookkeeping-Staff-Accounting-Support

[@lesliem512]

Loved your video it was so helpful. Quickbooks online is so basic I was struggling to come up with a way to do intercompany accounting. I do have a question, what would the next step be? When the On Target company goes to pay back the 25k for the ammunition would you do a journal entry? A deposit? And if so how would that look. Thanks!

[@lesliem512]

The thing is when On Target company pays For Hire back, its a reimbursement not income so I wouldnt want it to look that way correct? Or am I thinking to much into it. Let me know how you would record the payment back.

[@nerdenterprises]

@@lesliem512 When it's a reimbursement, you've recorded an expense on the books and a loan TO the company that paid for it. On the books of the company who paid for it, there is already a receivable created when they paid for the item. So when the loan is repaid, one company's check is the other company's deposit, and on both sides you are simply satisfying the corresponding receivable and payable.

[@lesliem512]

Got it. So basically the negative asset account would 0 out?

[@nerdenterprises]

@@lesliem512 Correct.

[@lesliem512]

@@nerdenterprises Sorry I seemed to have a million and five questions. Having a negative asset account is foreign to me, except for the accumulated depreciation. Why wouldn't On Target Inc have a liability for the loan instead of a other current asset account?

[@MrKevinGardner]

If everything is in balance, how do you then "close" this at the end of the year to remove the totals from the respective balance sheets?

[@nerdenterprises]

Hi! Balance Sheets are cumulative in nature, so you never close out these balances. A loan balance gets closed out when it it paid in full.

[@MrKevinGardner]

@@nerdenterprises Sorry, I was taking this to be the same as TRANSFERRING money between companies in which case the money is not getting paid back. Those transactions then remain on the Balance Sheet, using this method, and I cannot figure out what kind of adjustment entry is necessary once the accounts are reconciled.

[@nerdenterprises]

@@MrKevinGardner That's correct. If the inter-company loan is never repaid it remains there permanently. The only way to clear it out would be to journal it through the equity sections on both companies. For one company it becomes and owner contribution, and for the other, a distribution.

[@jameshobbs9782]

Love John Wick and the video was outstanding too!

[@nerdenterprises]

Thanks James!