Bookkeeping

Which account to use for partners loans?

I have a customer who has LLC and there are 3 partners. They deposit and withdraw money under loan. They do not want to use contribution nor distribution in 2020. They do this at least 3 or 4 times a months. First I created an Asset and a Liability account for loans from and to each partner but the business owners is asking me to create only one account as “due to/from xxx”. He wants to offset the deposits with withdrawals.
Now I am not sure how if I should merge this account to Liability or to Asset!
If I put in Liability some times the deposits are over the withdrawal and it would show a debit balance!!! and vice versa some times!

What do you suggest?

in progress 3 Answer

Answer

  1. 74 Answers

    Hi, many clients do prefer to see one account as your client suggested that says Due to/from. There will be times when the balance may be negative. I would not worry about this during the month or on a month to month basis. At the end of the year, you can look at that balance and for example, if the ending balance in the liability account is negative you would go to the chart of accounts and change the due to/from account (a liability account) to other asset account.

  2. 15 Answers

    Thanks. That was very helpful.

  3. 74 Answers

    Great your welcome!

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