In the last few years, a lot of uncertain things have shaken the financial stability of several small businesses. To safeguard them, the government brought the Paycheck protection program. It was designed to help small businesses with money to help them pay their payrolls for around 8 weeks. In today’s article, we will talk about how a user can record PPP loan forgiveness in their QuickBooks Desktop.
Such funds could be accessed to pay the mortgage interests, utilities, rent, etc., by the business. Although such landings were offered by the government, businesses were supposed to give them back, and most of them applied for loan forgiveness that was approved.
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How to Record PPP Loan Forgiveness of a User in QuickBooks Desktop?
Users need to make a journal entry to register PPP loan forgiveness as an income. It is imperative for a user to record it in such a way that QuickBooks is aware it is a non-taxable earning.
Here is how a PPP loan forgiveness for a user is recorded in QuickBooks:
Step 1: Navigate to the drop-down menu for Company and choose Make Journal Entry.
Step 2: A new window will show up. Add the date along with the entry number.
Step 3: Navigate to Account and look at PPP loan. The particular account should appear where you credited the PPP loan balance. Choose it.
Step 4: Now debit the particular amount of the loan which has been forgiven.
Step 5: Now navigate to the next row of the particular account column and press on it and choose Add New.
Step 6: Select this account as Other Income.
Step 7: Provide a name for this account like a Non-taxable PPP forgiveness account.
Step 8: Press Save and Close.
Note: The journal entry must balance itself. It is very crucial that the individual creating your tax return is aware that it is a non-taxable income and splits this entry from the remaining.
How to Write off the Particular Forgivable Portion of the Loan?
Here are the steps to write off the forgivable portion of the loan:
Step 1: In the Accounting tab on the left side of the navigation menu, choose Chart of Accounts and then press the button Add a New account.
Step 2: In the dropdown for Account Type, move down to Income and choose Other Income.
Step 3: In the particular Account Name field, add something specific and then click the Save option.
Step 4: Move to Accounting and then click Transactions and press Add Income option.
Step 5: Add a description and select the date and add the amount of the forgiveness in the field for the Total Amount.
Step 6: Open the dropdown for Account and choose PPP loan account.
Step 7: In the particular Category dropdown, choose the account created for Other Income.
Step 8: Press Save on the screen and then it is complete.
How to Record Forgiven Employee Loans in QuickBooks?
Here are the steps to record forgiven employee loan in QuickBooks:
Step 1: Press on Setting and then choose Chart of Accounts.
Step 2: Now, press on New from the left side of the menu.
Step 3: Now select the account type (you can select them as other current assets).
Step 4: Now select Loans to others in the particular Details type drop-down.
Step 5: Give a name like a Customer Loan.
PPP loan forgiveness is a crucial aspect of small businesses. In today’s article, we have highlighted how to record PPP loan forgiveness successfully in QuickBooks Desktop. You need to make sure that you follow the steps and pattern in order.
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How to Record the Initial Deposit Loan?
Here are the steps to record the initial loan deposit:
Step 1: In the Accounting tab, on the left-side navigation menu, choose Chart of Accounts. Now press the button- Add a New Account.
Step 2: In the given Account Type drop-down, go down to Liabilities and Credit cards and choose Loan and Line of Credit.
Step 3: Add a name you will be able to identify very conveniently. You can also add an account number along with a description. Press Save.
Step 4: Now go to the Transaction page. Press Add Income to make a transaction.
Step 5: For the particular Account, choose the bank account where the loan proceeds were saved.
Step 6: In the particular Category drop-down, choose Transfer from Bank, Loan, or Credit Card. Choose the new account for the PPP loan you recently added and press Save.
How to Record Accrued Interest?
In order to record accrued interest, follow the steps given below:
Step 1: Navigate to Accounting and then go to Transactions and press Add expense.
Step 2: In the given new Expense transaction, add the date along with a description.
Step 3: In the given Account Dropdown, choose the PPP loan account.
Step 4: Add the amount of accrued interest on the given statement in the particular field for the Total Amount.
Step 5: Open the dropdown for Category and choose Interest Expense.
Step 6: Press Save.
How to Run a Transaction Detail in QuickBooks Desktop Report?
Here are the steps to run transaction detail in QuickBooks Desktop Report:
Step 1: Navigate to Report.
Step 2: Click Custom Reports.
Step 3: Press Transaction Detail and then press Customize Report.
Step 4: On the tab that is displayed, select the dates to All Dates.
Step 5: Ensure to click Cash Basis in Report Basis.
Step 6: On the particular Filters tab, choose Account and select PPP Bank from the particular drop-down.
Step 7: Run the report and do any required changes like deleting columns or giving names to headings. You can also learn the report to make it convenient to integrate it in the days to come.