[Question] Loan to cc?

[Sandz]

My daughter & son in law have a cc. They are both members. I recently paid one of their suppliers a deposit for equipment they require & will pay the balance for them when it is delivered. This is to be repaid to me over 3 years. How will this be reflected in their books. Debit the asset/credit a loan acc??

[Dave A]

Debit the asset/credit a loan acc??

Applying the broadest interpretation of a loan account, yes. Being repayable over 3 years it's mostly a long term liability (current liabilities being debts repayable within 12 months).

I hope you got them to sign a contract with you and have the asset secured as collateral.

[Mark Atkinson]

Correct accounting treatment would be:

Debit Asset
Credit Loan Account

Then, as Dave has pointed out, each year (or each month) you would:

Debit Loan Account
Credit Current Portion of Loan (The amount of the loan that becomes payable within 12 months)

[Dave A]

Then, as Dave has pointed out, each year (or each month) you would:

Debit Loan Account
Credit Current Portion of Loan (The amount of the loan that becomes payable within 12 months)

Easier still, leave the current portion alone and just debit the long term liability account and credit the bank account for each payment made until the l/t liab account is cleared.
Only debit the current portion once the l/t liab portion is cleared.

I might make a lousy accountant in the strictest sense, but my working accounts are up to date and spot on as a result of a few judicious short-cuts

[Mark Atkinson]

Like I said, "correct" accounting treatment.

I didn't say easiest.

[Dave A]

reading all that again, I jumped the gun. You're spot on.

I was moving onto the payments side already

[Sandz]

Many Thanks. Loan repayable over 3 years at prime. Agreement in place to that effect