During 2006 my husband and I (the ony 2 shareholders) deposited 20K into the business checking account of our small business (it is an S Corp). Now I'm trying to reoncile income and expenses and I don't know how to categorize the loan, nor the re=payment of the loan by the business. I use MS Money for the bookkeeping, but haven't been able to find the answer in either the software help or online help. I'm almost bald from pulling out my hair trying to figure this out. Is the loan Income or Expense? Is the repayment of it Income or Expense? Thank you in advance for your answer!

The deposit of 20k by you and your husband should not be either income or expense, the first entry to your accounting records should be as followed

DR Cash 20k
CR Loan Payable 20k
(originally entry of 20k)

When the your company paid you back the entry should have been as followed:

DR Loan Payable 20k
CR Cash 20k
(To paid off loan to owners)

Both the deposit and repayment of the loan only effect your balance sheet and have no effect on your income statement. Hope this helps!

Smith has a pretty good answer.

However…

If your company is paying you INTEREST on top of the 20,000 loan, than that interest can be written off as an expense as long as the interest is at a reasonable rate.

So you would also Dr. Interest Expense when paying back the loan and the cash would be split somewhat between interest and principle repayment.

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Originally Posted by mjdillard

During 2006 my husband and I (the ony 2 shareholders) deposited 20K into the business checking account of our small business (it is an S Corp). Now I'm trying to reoncile income and expenses and I don't know how to categorize the loan, nor the re=payment of the loan by the business. I use MS Money for the bookkeeping, but haven't been able to find the answer in either the software help or online help. I'm almost bald from pulling out my hair trying to figure this out. Is the loan Income or Expense? Is the repayment of it Income or Expense? Thank you in advance for your answer!

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Thank you so much for the help!