If clients do not repay these costs you can write them off. Therefore, Advanced Client Costs belong on the balance sheet as an Asset, usually an Other Current Asset. Loans should be tracked on the balance sheet, not the profit & loss statement. When the client repays the expense that is re-payment of the loan. The IRS considers these Advanced Client Costs to be a loan. Although most law firms record income and expense on a cash basis, the handling of “Advanced Client Costs” is an exception, sometimes referred to a Modified Cash Expense.
This works fine except when law firms pay expenses on behalf of clients. A check written to pay this expense would Credit your bank account and Debit the appropriate expense account. Typically, when you pay a vendor, it’s considered an expense. My knowledge and opinions are based on my own understanding of the IRS rules. I will state that I am not an accountant, and before making any change you should speak with your accountant. However, in practice, there is a best way, which perhaps is the “right way”. If you need assistance with this process, visit with one of our QuickBooks Experts at (888) 388-1040.In theory, there are multiple ways to track client expenses in QuickBooks. If you would like the expenses detailed, repeat those five steps to create sub-accounts under PPP Loan Forgiveness (Payroll Costs including Vacation and Sick Time, Rent, Utilities, Mortgage Interest)Ĭreate a journal entry to debit the PPP Loan account for the amount forgiven, and credit the new PPP Loan Forgiveness account or sub-account for the amount of expenses to total the forgiven amount.Enter a name for the account, like “PPP Loan Forgiveness”.In the Detail Type, choose Other Miscellaneous Income.In the Account Type, choose Other Income.6) Create a new account to record the use of the PPP loan funds. The PPP Loan Funds sub-account will show how much of the funds remain.Īfter your lender determines how much of the loan is forgiven, you can transfer the forgiven amount. These amounts can be obtained from a Payroll Summary by Employee report.
The transfer amount used for payroll will be for the allowable expenses only (gross wages, employer retirement plan contribution, employer health insurance premiums paid). Note in the memo what the transfer is for.
Change the Account to the new bank sub-account.Enter a name for the account, like “PPP Loan”.In the Detail Type, choose Notes Payable.In the Account Type, then choose Long Term Liabilities.
#Tracking personal expenses in quickbooks online how to#
There are a few options in QuickBooks Online for how to record the funds received from the Paycheck Protection Program (PPP) loan and the expenses to which the funds are used. Recording a PPP Loan and Tracking Corresponding Expenses
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