Lots of people are struggling with the correct way to record the various forms of government assistance they have been receiving, and the advice I’ve seen out there is haphazard at best, dangerous to your bookkeeping at worst. How do you make the entries in your bookkeeping, and how do you track the balance of funds? How do the entries factor into your overall bookkeeping?
Here are a couple key principles to remember.
So here are the concrete steps for how you should record things in your bookkeeping. And for the record, this is how Backyard Bookkeeper has instructed all of our bookkeepers to handle these transactions for all of our clients.
The same thing goes for businesses that have existing SBA loans, where the SBA is taking over the payments from April – September 2020. The bank will show the loan balance going down – at the end of the year, to get the bookkeeping right, we will be making adjusting entries showing the amount of money received from the government against the loan balance. This will also be recorded as income, since it’s a government grant to fund the business, and that’s the only way to reflect the correct loan balance.