Chart of Accounts Question
In what account would I put a new line of credit total amount?
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bF0nxBowmr4izzacwZ5xHE
02/15/11 4:36pm PST
Viewed by asker 02/16/11 3:32pm PST
Viewed by asker 02/16/11 3:32pm PST
7 Replies
lynda
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02/15/11 6:08pm PST
Your line of credit is a liability acct.
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Lynda Artesani
Artesani Bookkeeping
www.artesanibookkeeping.com
Lynda Artesani
Artesani Bookkeeping
www.artesanibookkeeping.com
02/15/11 7:16pm PST
Lynda, Are the draws and the payments also in a liability separate account?
02/16/11 2:12pm PST
Actually, you should open up a balance sheet liability account "Line of Credit".
Don't enter anything into it until you draw down on the line of credit. If you pull $10,000 from the LOC, $10,000 debits into the bank account and $10,000 credits into the LOC account.
As you pay the line down, payments will credit from the bank account and debit to the LOC account. Be careful with this as part of the payments will be interest. For example, if you pay $1,000 back, $800 might be paid down on the LOC and $200 might be interest expense to the P & L interest expense account.
02/15/11 7:06pm PST
Thanks for the information Lynda, If $40,000 is the total of the Line of Credit and I put it in a Liabilities Account. Do I also put the amount that has been withdrawn, such as $10,000 also in a liability account and apply the payments or paybacks back and forth to and from the original $40,000?
Thanks in advance for your second reply to my question.
sweetmitzi
02/16/11 4:48am PST
The solution
Only the money you owe will flow thru that liability acct and the repayments to pay it down.
