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General Accounting Discussions: How to setup accounts for a loan to someone else?

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    • CommentAuthorkatahdin
    • CommentTimeMar 25th 2008
     
    I know its in how you set up the transactions - and if the basic pluses and minus work !! It WILL turn out correct !!! LOL But the crux is setting it up..

    I loaned you $100,000 (lets make it significant for you) ;=}
    A:
    When that happens - that will:
    debit (increase) A/R(account receivable) asset account
    credit (decrease) my bank/ investment/asset account
    B:
    At the end of a period (daily,monthly,annual) Interest is charged:
    debit (incr) A/R acct
    credit (incr) Income acct
    C:
    You give me a bunch of dough !!! Yea..
    Debit (incr) my bank/asset acct
    Credit(decr) A/R acct

    So far so good, but what happens when YOU don't pay me. At end of next period,
    I do B: - but i really don't have income ... What am I missing? So I haven't set this up right, but just can't 'see' which way to go? Thanks..
    • CommentAuthordylangaine
    • CommentTimeMar 26th 2008
     
    its accrued income, or income that you will receive, so it can still be considered income even though you have not received any cash.
    • CommentAuthorkatahdin
    • CommentTimeMar 27th 2008
     
    "accrued income" sorta indicates to me an asset acct. I thought income is only a period transaction. ie income categories are cleared out/zeroed/adjusted to retained earnings at the end of the period?

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