How to account for PPP loan

Just wondering if there's any guidance on how to account for funds from PPP loan in Finance?

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  • Official comment

    Hi Virginia,

     

    Thanks for your thoughts on this. Based on what we've seen so far, here's what we've been suggesting at Concordia Technology Solutions.

     

    1. Set up a Liability Account with a 0 Dollar balance (You can call this PPP Loan)
    2. Create a deposit to the bank account you'll be receiving the PPP money to using the Liability account as the offset.

    Depending on your circumstances, your PPP Loan may be fully or partially forgiven. To handle this, take the following steps.

    1. For the amount that is forgiven on your PPP Loan, create a journal entry where you debit your PPP Liability Account and Credit an income account (You may want to create one, call it PPP Forgiveness).
    2. This will reduce the liability and increase the income, showing the forgiven portion of your loan as income.

    For paying back the remaining portion of your PPP Loan, you can write checks against the liability, or create a journal entry where you debit your PPP Liability and credit your asset account you're paying it off of. If the loan accrues interest, pay only the principal against the liability, the interest should be paid against an expense account.

     

    I hope that helps clear up this process. As always, for accounting questions, we do recommend consulting your local financial professional for definitive answers.

    Blessings,

    Jordan Bogart
    Software Support Technician
    Concordia Technology Solutions

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  • I have the same question. Just received SBA PPP loan and am trying to figure out how I should add it to Shepherd Staff.

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  • Hi, Diane,

    Here's what I came up with. I set up an income account - 015-00-01-09 (next sequence # available) named PPC Proceeds and an expense account 016-00-01-50 (same thing) named PPP Expenses. Our loan was set up as a line of credit. I transferred half in April and the other half first of May. Recorded as deposits using the income account and funds went into our general checking account. I had already paid much of payroll/eligible expenses before depositing funds and offset them against the usual expense accounts used (secretary, pastors salaries, etc.) plus I still wanted them to show in those accounts as expenses. I made journal entries to track these, debiting the PPP Proceeds income account and crediting the PPP Expenses account. I also referenced applicable ch or journal entry for the actual payment. If we end up having to pay the loan back I'm planning to write checks using the PPP expense account. It's not a perfect set up but I think it will work. I can see at a glance how much of the loan is left by looking at the balance on PPP Income account. I also found an Excel template that I'm using to track loan. Here's a link to youtube where you can download template. https://www.youtube.com/watch?v=tAX_PAQp3hA. I'd like to hear what you come up with. Good luck and God's blessings!

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  • Thank you Jordan and Virginia! I created similar accounts and verified all looks good on the financial reports after journaling the first payroll with PPP funds.

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