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Recording PPP Activity Without a Separate Account


This article discusses how to post Payroll Protection Program (PPP) Loan income and expenses in accounting software, if you are not opening a separate bank account for the funds.

Apr 27th 2020
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In Part I of this discussion, we focused on how to post PPP funds into your accounting software if there is a separate bank account for the funds. Once again, in this article, I have teamed up with my colleague Diana Cohn of Corner Office to detail ways to book income and expenses related to the PPP from the SBA.

Note: This article does not go into detail about who is eligible or how to apply for these funds. Instead, we focus on entries to make in your accounting software of choice, once the PPP loan funds have been received and spending has started. All examples use QuickBooks (desktop and online) as the accounting software, so modify accordingly if you use a different program.

Also, keep in mind that every business has different plans for how best to use their PPP funds, so this article will address only the most basic scenario: spending at least 75 percent of PPP funds on payroll costs, and up to 25 percent of the funds on other allowable expenses. See the section at end of this article on PPP allowable expenses. Note: Our suggestions are not the only way to track PPP funds - we are just offering a scenario we have tried our best to test in QBD and QBO.

PPP Loan Income Setup – When Not Opening a Separate Account

To our understanding, whether or not you have to open a separate bank account for your PPP funds is determined by your PPP lender. If you are not opening a separate bank account, read on for what to do in QuickBooks. Many of the steps are the same as what we listed in Part I of this series, but we will repeat them here.

Setting Up the Loan Account

This loan will be a Liability (not free Income) until you determine how much of the loan will be forgiven. As such, you need to create a loan Liability account on the Chart of Accounts.

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Replies (4)

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By Michael Abrams
Apr 29th 2020 11:40 EDT

While I can appreciate the mechanics of how to handle things in QB, personally this seems much more involved than necessary.

Regardless of if the PPP loan is forgiven, actual expenses should still be recorded for future comparison. Any forgiven amount is simply Other Income (particularly for those states with a Gross Receipts tax). Finally, the Excel sheet implies that the payroll portion of PPP proceeds is limited to 75% of the loan amount as evidenced by the "Remaining" column.

In my opinion, PPP proceeds are nothing more than a loan when received and either taken in to income when forgiven or continued as a loan for any un-forgiven amount. I would set up the original proceeds as a Short Term Liability since the intention is to have all the loan proceeds forgiven, presumably.

Some would argue that for whatever portion of the proceeds will be forgiven, no operating expenses should be booked - that is, "offset" by the free moneys. I disagree and don't think that approach is sound bookkeeping/accounting. The nature if the inflow has no impact on the character of the outlow.

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Replying to Michael Abrams:
Jody Linick
By Jody Linick
May 1st 2020 18:45 EDT

Hi Michael, Yes, there are many options for how to enter the PPP funds in and out, this design is just one suggestion. It may be just right for some, too complicated for others, and the example is just one scenario. It's not feasible to document every possible scenario, since the situation will vary for each business. And my hope is hte Excel tracking would be food for thought, but I expect would need to be modified to fit each circumstance. Thanks for your comments!

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By LaurieS
Apr 29th 2020 12:27 EDT

Can someone please clarify how the payroll dates work for the PPP loan. Do we go by Check Date or when the payroll was accrued? Example: My client received his PPP loan on Friday April 17th. He pays every two weeks. Friday, May 1st is his check date, but the payroll period is 4/12 – 4/25. Can I use all of the May 1st checks to go against the PPP loan or only 1 week of that check run? Thank you in advance!

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Replying to LaurieS:
Jody Linick
By Jody Linick
May 1st 2020 18:49 EDT

Hi Laurie,
We are all looking for clarity on this, and no one can seem to find a precise answer. Please check out this link - the AICPA has requested some changes of the Treasury Secretary and the SBA in light of some flaws in the way the legislation is written.

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