Recording a PPP Loan in Your Ledger
There are several phases to the PPP loan. At least two entries need to be made in the accounting when the loan is received and when it is forgiven or paid back.
Without further ado, here is a quick set of steps for getting it in the books:
- Set up a new account in your chart of accounts. The account type should be Long Term Liabilities.
- Name it “PPP Loan.”
- When the PPP loan is deposited into your bank account, record it to this new loan account.
- Wait until you use it or need to report on it.
- Once the bank confirms the amount of the PPP loan forgiven, move it from “loan” to “income” in your ledger. To do this, set up another new account in your chart of accounts. The account type should be Other Income. Name it “PPP Loan Forgiveness, non-taxable.”
- Then, do a Journal Entry. Using the dollar amount forgiven, debit that amount from PPP Loan and credit the same amount to PPP Loan Forgiveness, nontaxable.
If there is any balance left in PPP Loan, that is the amount that you must pay back. Run a balance sheet report to see it. When paying the loan amount back, post the repayment (of principal only, not interest) to the PPP Loan account.
Post any interest accrued to Interest Expense. That zeroes out the balance owed. The interest show ups as a business expense on the Income statement (Profit & Loss report).
The bank wants you to track qualified expenses for forgiveness and fill out their own form to apply for it. You don’t really need to tag these expenses in Quickbooks. However, you can create a new “class” named PPP if you want to run a QB report that lumps them together.
Each wage, benefit, rent, or utility expense that qualifies would be entered with this class selected. However, the bank will probably ask to see your 941 reports, payroll reports, rent, or utility receipts for supporting documentation. Extra tracking in QuickBooks or other accounting programs is not required.