lending money to other company

Quote:
"Hello!

I need help. I have money that I transfer into another company's account as a loan.(I also own this other company) This is done a few times per month so that bills can be paid and I need to figure out how to correctly record this transfer of money and that this other company has to repay it. I would have to say that it is a long term loan as it will be a while before I get reimbursed.

I also wanted to know how to turn off the multi currency. I turned it on accidentally and now all of my invoices have my countries initials in front of the dollar amounts and I don't want it there.

Thank you in advance for your help!!!"

Set up an intercompany loan receivable/payable in the respective company records. Track disbursements, payments and interest in each company reconciling them to each other on a periodic (at least monthly) basis.

Multi-currency cannot be turned off once turned on. The only other option is to create a new company, possibly at year end, enter your opening balances and move forward from there.

Quote:
"I would have to say that it is a long term loan as it will be a while before I get reimbursed."

It could potentially be very expensive in the future in terms of tax implications if loan documents are not carefully constructed.

Be sure to discuss this in some detail with your Professonal Designated Accountant both for your Personal Taxes, and with the Company's Accountant from the company's perspective.
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Quote:
"Set up an intercompany loan receivable/payable in the respective company records. Track disbursements, payments and interest in each company reconciling them to each other on a periodic (at least monthly) basis.

Multi-currency cannot be turned off once turned on. The only other option is to create a new company, possibly at year end, enter your opening balances and move forward from there."

Hi Helga - thanks for the info!! What I don't understand is how to set it all up in QB. In the chart of accounts do I set up the lending company with this as an asset and then show the cash transfers from there to the other company. OR Do I set the other company up as a customer that owes me and do actual invoices?
Thank you again!!
K

Quote:
"What I don't understand is how to set it all up in QB."

Set it up in exactly the same way as you would set it up in manual sets of Corporate Accounting Books, following the flow of the vouchers and terms of the contracts.
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Add a current asset account called "Loan to ABC". (ABC = koss's other company) If you use GL numbers it would be in the 1000s - after the bank accounts and a/r, before the capital asset accounts.

Enter all payments to ABC into that account. (...and receipts when it starts to pay you back)

If ABC is paying interest - breakdown the payments from them into the loan account and an "interest income" account.

If you have a separate QB set of books for ABC - add a current liability account called "Loan from XYZ" (XYZ = koss's company that makes money). Paybacks to XYZ would go into that account. Any interest would go into an "interest expense" account. (The GL would probably be in the higher 2000s, after draw/shareholder loan.)

Check with your accountant to make sure you are following any rules about loans and interest correctly and appropriately, especially if either company is incorporated or in partnership with someone else. (I'm not sure that there would be any specific rules or that you would charge/pay interest if they are both proprietorships - I believe the end result for both companies would go into your income tax reporting anyway. Ask a professional to be sure!)
Kate

Quote:
"Add a current asset account called "Loan to ABC"."

I would be EXTREMELY cautious about giving "how-to"s to persons who first need the underlying understanding.

Accounting and bookkeeping entries RECORD actual underlying transactions - they dont INVENT or CREATE them....

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Quote:
"I would be EXTREMELY cautious about giving "how-to"s to persons who first need the underlying understanding.

Accounting and bookkeeping entries RECORD actual underlying transactions - they dont INVENT or CREATE them....
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I need to figure out how to correctly record this transfer of money and that this other company has to repay it. I would have to say that it is a long term loan...

...What I don't understand is how to set it all up in QB. In the chart of accounts do I set up the lending company with this as an asset and then show the cash transfers from there to the other company. OR Do I set the other company up as a customer that owes me and do actual invoices?

Joe,
We may be thinking about this from different perspectives. (Hey - I'm new & haven't completely figured out where people come from yet.) I'd rather see the op make the entry correctly and talk to their accountant about the implications than not tell them "how to". The op is loaning money from one company to another. It's already happening. They need to correctly record that transaction. I'd rather tell them to set up XYZ with an asset account and show the cash transfers than leave them thinking about creating invoices for a customer.

I've given them info on how to set up the GL account (and what type it is) and said they should talk with an accountant about rules for loans and interest. There is no invention or creation of a transaction - only a process to record what is going on already.

I think your advice about talking with their accountant is brilliant and they need to know all the implications, but they asked how to enter the transaction properly and I believe I answered that correctly. (a quickbooks bookkeeping entry answer rather than underlying accounting answer.) :)
Kate

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"op is loaning money from one company to another. It's already happening"

No, I dont believe so - the "transfer of funds" is being made up as as he/she is going along.
Dollars to donuts there is absolutely NO documentation or authorization anywhere for these so-called "loans"
The "loan" appears to be a fiction at this point - there is no "correct" way to enter a fiction.

Such things should be taken seriously - it allegedly isnt playing with ones hobby in a sandbox - its allegedly a multiple-corporation related and associated party environment, involving real money, with real business, legal, and income tax effects... and thats why Bookkeeping courses, Lawyers, and Accountants exist....

Apart from the bookkeeping, the fact that the owner needs to do this at all is a strong indication that they could benefit from some financial and business consulting advice from their professional accountant...
Yes, again that sounds harsh, but I do find it painful to read about people shooting themselves unnecessarily in the foot.. :(

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:D
First of all I would like to say Thank you Kate for all of your help. I would have jumped into this conversation sooner but I have been away.

:angry: Joe - you seem to be making the assumption that I am doing crooked business here and I really don't appreciate it. Do you think that if I was , I would be asking for help on a QB discussion site(where I find everyone is pretty honest, helpful, decent people) or do you think I'd rather get my help elsewhere?????

Dollars to donuts there is absolutely NO documentation or authorization anywhere for these so-called "loans"
The "loan" appears to be a fiction at this point - there is no "correct" way to enter a fiction. [/i]

I will have you know that "DOLLAR TO DONUTS THERE ABSOLUTELY IS DOCUMENTATION FOR THESE SO CALLED LOANS"

You, once again, are assuming that this loan is "Fiction" - you don't know me, my business, this situation and why I am doing what I am doing or even what is is about - I don't come onto this website to tell my whole life story, but to get help with what I need to do in QB in a legal , accurate, and simple way.
You are actually arguing with Kate on my intentions and telling her not to help me. I do have an accountant - he does know the suituation and I only needed to know how to do the QB entries so that it is correct - BUT I didn't think that I had to get into all the details, and I certainly didn't think that it would generate such a response.

Apart from the bookkeeping, the fact that the owner needs to do this at all is a strong indication that they could benefit from some financial and business consulting advice from their professional accountant...

In regards to that statement - I am sorry that we all can't be as wealthy as you are Joe - sometimes when other people start a new business, it does require some financial assistance for a short while. BUT again - thanks for your remarks.

I have seen that you do, in fact, give good advice Joe - but if you are having a rotten day please put away your keyboard and stop trying to make others feel less superior to you. People come here for help, not to be attacked.

Quote:
"First of all I would like to say Thank you Kate for all of your help. I would have jumped into this conversation sooner but I have been away.
Joe - you seem to be making the assumption that I am doing crooked business here and I really don't appreciate it. Do you think that if I was , I would be asking for help on a QB discussion site(where I find everyone is pretty honest, helpful, decent people) or do you think I'd rather get my help elsewhere?????"
Sorry if I offended you.
Do it your way if you please, its your life, your business.
Kate's band-aid was helpful - But better to speak to your Company's Professional Accountant than to take a 1/2 of a band-aid from a Forum.
However, the following would be my take on the posts (no personal offence, just what I would be attempting to fix on the presented facts if I was asked to):

"I have money that I transfer into another company's account as a loan.(I also own this other company)"
Apparently not a loan, does not indicate that there is documentation, indicates a careless (not crooked) attitude to bookkeeping.
- Input from the companies Professional Accountant would be helpful.

"This is done a few times per month so that bills can be paid"
Indicates severe absence of financial advice - Input from the companies Professional Accountant would be helpful.

"and I need to figure out how to correctly record this transfer of money and that this other company has to repay it. I would have to say that it is a long term loan as it will be a while before I get reimbursed."
Indicates absence of elements of a loan, absence of documentation. Absence of adherence to GAAP. Potential adverse tax effects to the companies and possibly the "Shareholder/Director/Officer" - Input from the companies Professional Accountant would be helpful.

"In the chart of accounts do I set up the lending company with this as an asset and then show the cash transfers from there to the other company. OR Do I set the other company up as a customer that owes me and do actual invoices"
Indicates insufficient bookkeeping knowledge - Input from the companies Professional Accountant would be helpful.
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