Accounting for Line of Credit in Billling Matters

I'm using TM/BM 9. My firm has a line of credit with a lender. I need to figure out how to account for draws on this line of credit.

I have created an account of type "credit card" since my only other choices were bank and fund. I have set up a GL liability account for the lender. I have created a vendor account for the lender and have linked the vendor to the GL liability account.

My lender cut me a check for X dollars which I deposited into my operating account. I now need to account for this deposit in BM.

What I tried to do is make a miscellaneous deposit specifying the GL liability account, but when I try to save, I get an error message saying "You may not use another bank or fund account as a detail item." This is despite the fact that the account is NOT a bank or fund account. It is a credit card account.

Anyone got any ideas?

Thank,

Derek Hong

Hong Law, PLC

Cedar Rapids, IA

319-294-5853

You do not need, or want to set up a credit card account. Just set up the line of credit as a Liability account. When you take money from the line of credit and deposit it into the bank account you make a miscellaneous deposit into the bank account (a debit) with the offsetting credit being the liability account. When you pay back the line of credit you would write a check (a credit) out of the operating account and offset (debit) the liability account and any interest expense.

Caren,

Thanks for the response. That makes sense.

But what if the lender IS a credit card. Suppose I have a credit card account which I am allowed to draw cash advances against. I want to be able to set up the account as a credit card account so I can charge against it, but I also will need to account for the cash advances.

When I deposit a cash advance check from a credit card line of credit, how should this be accounted for?

Thanks,

Derek

I think I have figured out how to make this work. It appears that the following 2-step process should work.

1) When making the cash advance of say $1000:  Create a $1000 charge for the CC account and select "Checks to be deposited" as the GL Account. This should result in the following Credits/Debits:

CC Acct                   $1000

Checks TBD  $1000 

2) When depositing the $1000 Cash Advance Check:  Create a $1000 Misc. Deposit for the Bank account and select "Checks to be deposited" as the GL Account. This should result in the following Credits/Debits:

Bank Acct                   $1000

Checks TBD   $1000 

So after these 2 transactions, CC Acct should have a $1000 credit balance and Bank Acct should have a $1000 debit balance which is exactly where I want to be.

This appears to work. Does anyone see anything wrong with this approach?

Thanks,

Derek Hong

Hong Law