This guidance is for profit share purposes ONLY, not tax purposes. Please consult with your CPA for tax guidance.
Any entries made to adjust income or expenses for tax purposes should be made outside of AccountEdge, or booked below the line.
In response to the government loans for COVID-19 KWRI recommends the following accounting guidance to book and track the PPP and Disaster Relief Loans.
Step 1: Record the loan when cash is received
Debit: Cash Account (User Defined 1-090X)
Credit: ST Liability (Used Defined 2-40XX)
Market Centers may opt to create a separate bank account however this is not required. We also do not recommend co-mingling the Disaster Loans and the PPP loan. The PPP loan should be recorded separately and applied towards qualified expenses.
Step 2: Pay expenses
Debit: Applicable above-the-line expense (PPP qualified expenses ie rent, payroll etc. as stated in your loan agreement)
Credit: Cash account chosen in Step 1
If expenses were pre-booked, Debit the corresponding liability and Credit cash.
Step 3: Reconcile bank accounts weekly
At no time should the loan be reduced through income or equity. The balance should remain the same until such time the loan is forgiven by the government or you start to pay back the loan as stated in the terms of the agreement.
Have you received a letter from the Agency forgiving the Loan? If not, DO NOT PROCEED. If you have received written confirmation of loan forgiveness proceed to STEP 4.
Step 4: Review Financials and Consult
Conduct a detail review of your balance sheet to ensure that any entries made at the beginning of the year are reversed to maintain the integrity of profit share. It is highly recommended you work with your CPA for adjusting journal entries.
After consulting your CPA if there are questions on whether to book income statement entries above or below the line consult your regional leadership prior to transmitting.