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company transfers
I do books for a small rental company. This company needed to purchase 3 additional rental items, worth $40,000, $32,000 and $11,000, but the company’s bank would not approve loans for the equipment at that point, so the owner set up the loans through his personal bank account. The owner now writes himself a cheque from the company to cover these loan payments, so by the time the loans have been paid, the company will own the equipment since they’re making the payments. I’m trying to wrap my head around a method to post this all properly.
Holstein,
My apologies for the delayed response!
Although the owner borrowed the money from his personal bank, he did so for business purposes. Since the company will own the equipment when it’s paid for you want to
1) Add the equipment to the companies Fixed Assets and show that we owe the owner the amount of the loans.
a. Debit Fixed Assets – Equipment for each piece of equipment and credit an Owner’s Loan – Long Term Liability account.
i. Instead of borrowing the money from the bank, we borrowed it from the owner.
b. Now when you write the check(s) to the owner for the payments (that he is hopefully paying the bank), you’ll post them against the Long Term Liability account. This way you can easily keep an eye on the balance we still owe the owner.
In your case the owner is basically the bank. Hope this helps. If you need more assistance, please call us directly at 503-885-0776
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