Hi, How do I record a bank loan & directors loan when it was NOT banked.

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Hi, How do I record a bank loan & directors loan when it was NOT banked as it was paid directly to the vendor when I purchased the business.  is it a journal entry for the credits (for loans) / debits / accounts payable(payment to vendor) .  If I set them up as separate bank accounts (credit accounts) this works also but then my payment against these accounts do not show in my bank rec ? 
Thank you in advance.
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Tracey

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Posted 11 months ago

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Michael Corrigan

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You will need to create a journal entry for the purchase of the business which would also incorporate the loans from the directors. There is no need to set it up as bank accounts as they are not. You first need to set up the asset and liabilities before creating the journal entry.
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Tracey

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Hi Michael,

thank you so much for responding to my question.

I am new to this type of accounting (pen & book person). Is it possible to explain how I do this ? You mentioned setting up an asset and liabilities account - I have a liability account for the bank loan (funds used to purchase the business but not banked) and for the directors loan to purchase the business (again not banked funds).
Sorry I am not an accountant or book keeper (but learning as I go).

Any help would be appreciated.

Kind regards

Tracey

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Michael Corrigan

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Hi, you need a create an asset which is the Business you have purchased. The transaction in the bank loan will be allocated to the Business Asset. In relation to the director loans, you will need to create a journal entry.

DR Business asset
CR Directors Loan