How to record it in the QuickBook when we submit an invoice to the lender

[Partnership]

We have 30 years long term note for the amount of $16,000,000 from CitiBank. The billing is based on how much we spend for the construction project.

In October, we spent $200,000 for the project. How can I record it in the QuickBook when we submitted the invoice?

My thought:

DR Account Receivable $200,000
CR Notes Payable $200,000

[Snaggletooth]

More Info

More information needed. Other than CitiBank, who are the other parties? Is your entity a construction company operating a project out of an escrow account? Who are you proposing to "bill" $200,000? CitiBank to establish an escrow? The customer?

[Black Bart]

Who?

Gosh, Pard'ner -- Your bookkeeping sounds a lot like mine. It's those pesky details that are the problem -- not you. Anyway, $200K here, $200K there; what the hey I say. I mean, somebody owes it -- it's not like you embezzled it or anything.

Think positive, dude! Look at the bright side -- the books are in balance and you've got it half-right (the CR part's okay).

Okay, okay, that's enough. I've gotta go with Snag -- details are needed for the DR. Dang picky accountants, anyway!

[BOB W]

Quick Note.

For the size of your venture you should have a "local" Accountant monitoring your business activity entries. Quick Books should only be used to capture everyday activity with the support of your local accountant making certain entries, such as your question posed here.

[Unregistered]

I agree with Bob

You should have a schedule with a local accountant to come in to review your transactions monthly, and also have him/her on speed dial to ask questions. We offer a comprehensive service to clients in which they pay a monthly retainer and get x number of hours of consultation, either in person, phone or email. They feel like they have someone to turn to with their questions and I feel comfortable that I won't be making numerous changes at year end, and subsequently billing much more to the client.

JoshInNC

[OldJack]

DR Account Receivable $200,000
CR Notes Payable $200,000

I could agree with your entry if you are to receive the funds from the bank and spend the money yourself. But I find that in most accounts such as yours the construction account with the bank is actually writing a check direct to the vendor/supplier for you. Thus, you need additional entries to record the purchase of the supplies or materials.

Quickbooks has a proceedure/feature to handle this two entry system and it is called "Items". Basically, you set up Item accounts for each of your Job (Inventory) Asset Accounts (carpentry, plumbing, material, etc.) so that the entry will debit the job asset account and credit the bank liability account.

When you record the vendor Invoice in Accounts Payable you debit the Job Asset Account with/thru the "Items" Account in the "Customer:Job" column.

Then when you Invoice the bank the item is in a Que (from the Customer:Job column entry) for you to pick to show on the invoice. The picking of the invoice items makes the credit entry to the bank liability account automatically and of course the invoice puts the total in accounts receivable due from the bank.

If the bank writes the checks then you need an entry to clear the accounts receivable and the accounts payable of the vendor. Since Quickbooks doesn't like doing general entries to clear such accounts, you can setup a separate bank account for the clearing entries by "paying the vendor" and "depositing" proceeds from the bank and the clearing account will always balance to zero.

[Unregistered]

I could agree with your entry if you are to receive the funds from the bank and spend the money yourself. But I find that in most accounts such as yours the construction account with the bank is actually writing a check direct to the vendor/supplier for you. Thus, you need additional entries to record the purchase of the supplies or materials.

Quickbooks has a proceedure/feature to handle this two entry system and it is called "Items". Basically, you set up Item accounts for each of your Job (Inventory) Asset Accounts (carpentry, plumbing, material, etc.) so that the entry will debit the job asset account and credit the bank liability account.

When you record the vendor Invoice in Accounts Payable you debit the Job Asset Account with/thru the "Items" Account in the "Customer:Job" column.

Then when you Invoice the bank the item is in a Que (from the Customer:Job column entry) for you to pick to show on the invoice. The picking of the invoice items makes the credit entry to the bank liability account automatically and of course the invoice puts the total in accounts receivable due from the bank.

If the bank writes the checks then you need an entry to clear the accounts receivable and the accounts payable of the vendor. Since Quickbooks doesn't like doing general entries to clear such accounts, you can setup a separate bank account for the clearing entries by "paying the vendor" and "depositing" proceeds from the bank and the clearing account will always balance to zero.

Thanks. Our book is very clean. It does not need to hire local consultant. It would be "crazy" to think we need to open an escrow account because there is no sale or purchase ........

My doubt:

This is a loan and we debit Accounts Receivable.

[Partnership]

What is an Escrow Account?

An escrow account is a fund that your escrow officer establishes for the lender in order to pay property taxes and hazard insurance as they become due on your home during the year for the duration of the loan. In this way, the lender uses the escrow account to guard its investment in your home.

[geekgirldany]

Read OldJacks post again because he is correct and this is how most banks do it. We are making assumptions here and really need more details. My customer builds houses and gives the bank an estimate of the money needed then they give him the money to spend. He does not bill them. But here is my explanation on your situation:

The assumption is you are paying out for the expenses before you get money from the bank. Doesn't make sense but your post makes it sound that way.

You will set up Items for each expense you incur while doing the job. When you set up the Items as a Service item you will have an Expense account and a Sales Account. In the Expense account enter the Job Inventory Or Work In Progress account in the Sales side enter the Bank Liability.

Okay so when you enter a bill you select the item you are paying for and enter the customer/job name. Later you go ahead and pay this bill. This will send it over into the WIP take it out of accounts payable. So now you have in the WIP account lets say 200,000 for this customer. You are ready to invoice the bank for the 200,000. So you go to the invoice select the customer's name, go to Time/Cost, you see all information on the bills related to this customer. You click on them. You now have them automatically entered into the invoice. You then save the invoice.

This moves the 200,000 to the Bank Liability account and also puts a entry into the Accounts Receivable. When you receive a check from the bank you will go through Receive Payments and select that customers name to take it out of the Accounts Receivable move to Undeposited Funds accont. Then deposit the money into your checking account.

The 200,000 will still be in the Bank Liability account though. This is correct because it will not be paid off until you finish the project/sale. You will have to do these transactions through a Adjustment bank account and general journal entries. You will pay off the loan and also move the costs from the WIP account to the Cost of Goods sold account.

So could you do DR Accounts Receivable and CR Notes Payable? Yes you can through a General Journal entry. But this will not provide the bank with the information on how much was spent. Hopefully you entered in Bills and recorded them into your WIP account. If not you won't have no cost in it. You still have to go through receive payments to get the 200,000 into your bank account. And you still have to have an Adjustments Register to clear the bank loan and the WIP account.

Whew! so yeah that is my take. If my post and OldJacks post doesn't help you get a QuickBooks Consultant to help you. I know you say your books are clean and I am sure they are. But a QuickBooks advisor like me can help you answer these questions and help you with QuickBooks in general. We do not know your situation in detailed and there are various ways these transactions can be entered. If you still want to do it yourself buy the book Quickbooks for Subcontractors/Construction.