So, you got approved for the Paycheck Protection Program Loan (PPP Loan). That’s great! This is an important and useful tool for you to keep your business in good shape during these unfamiliar times. Now what?
Now comes the critical work of adding the loan to your books and keeping accurate and efficient records on the use of the proceeds so you can minimize the amount you have to repay. In this post, I’ll give you the step-by-step guide to adding the loan to Quickbooks Online and recording expenses.
How to get it on the books
Time to make your books reflect the new loan and show an influx in funds. These are the steps to adding it to your Quickbooks Online.
Step 1: Bank account set-up.
Set up a new bank account. Some banks will require you do this. I recommend you do it regardless. Take the funds and put them in the new business account. Sync new account with QBO. Doing so will create a new asset account in your Chart of Accounts.
In the menu on the left side of the screen, click “Banking.”
Click the “Add Account” button in the top right of the screen.
Find the bank where your new checking account was opened.
Follow the prompts to securely log into your new bank account and sync it with Quickbooks Online.
When given the option to select the type of account, select “Checking.”
Select the date you want to pull information to sync and click connect.
Step 2: Name the new checking account “PPP Loan checking.”
In the left menu bar, find “Chart of Accounts” under “Accounting” and click.
Find the newly created and synced bank account. To the right, click the drop down arrow next to “View Register.”
Click “Edit” in the drop down.
Find the “Name” field and rename the account “PPP Loan Checking.”
Click “Save and Close.”
Step 3: Create a liability account for the loan.
You will have to create a new long-term liability account in your QuickBooks Online Chart of Accounts. Call this account “PPP Loan”
Find and click “Chart of Accounts” in the left menu under “Accounting.”
Click “New” in the top right of the screen.
Under “Account Type,” select “Long-Term Liability.”
Under “Detail Type,” select “Notes Payable.”
Under “Name,” type “PPP Loan.”
Click here to see a screenshot of what your screen should resemble.
Click “Save and Close.”
Step 4: Create a deposit transaction. Be sure to select the “PPP Loan Checking” as the account receiving the deposit and the “PPP Loan” as the originating account.
This effectively increases the balance of your “PPP Loan Checking” within your bookkeeping system and puts the loan on your books.
Click the “+New” button in the top left corner.
Find and click the “Bank Deposit” option.
Under the “Account” field at the top, select “PPP Loan Checking.”
Under “Date,” select the date the loan proceeds were deposited.
Under “Received From,” type in the name of the bank.
Under the other “Account” field, select “PPP Loan.”
Under “Amount,” type in the amount of the proceeds.
Note any references you have where applicable.
Click here to see a screenshot of what your screen should resemble.
Click “Save and Close.”
There you have it. The loan is officially in your books and you are ready to start spending on qualified expenses.
How to log expenses
Create expense transactions in Quickbooks every time you spend money from your “PPP Loan Checking.” Make sure to only spend money from the “PPP Loan Checking” when it is on a qualified expense (payroll cost, business mortgage interest, business rent, or business utilities). This is the same process for creating expense transactions at any other time. Run payroll as you normally would, add a rent expense as you normally would, etc.. The only difference is which checking account you designate the funds being paid from.
Here is a run-through on how to add a rental expense.
Click “+New” in the top left of the screen.
Find and click “Expense” in the menu options.
Under “Payee,” type in the person or business you or paying.
Under “Payment Account,” select “PPP Loan Checking.”
Under “Payment Date,” select the date the check was written.
Under “ Payment Method,” select “Check.”
For the “Category,” select the expense account that it belongs under.
Under “Description,” type in a description that is clear.
Under “Amount,” type in the expense amount the check was written for.
Click here to see a screenshot of what your screen should resemble.
Click “Save and Close.”
There is how you add expense to Quickbooks Online when using PPP Loan funds. Be sure to keep all records in regards to the use of the funds (receipts, statements, etc.) and to use the funds as outlined by the Loan Forgiveness Stipulations. Also, make certain you match these transactions when going through the checking account bank feed. Adding will cause duplication, matching will ensure clean and accurate books.
You are on your way!
Now you know how to record the PPP Loan and use of the funds in your books. You are well on your way to maximum forgiveness. If this all seems like a lot, remember, you can always schedule a free consultation to see how I might be able to ease the bookkeeping load for you.
In the next post, “The Road to PPP Loan Forgiveness,” we will discuss what is needed for loan forgiveness and the steps in Quickbooks Online to record when it happens.