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Can you help me with using Asset Purchase and Asset Sale for short term loans? I have a small farm company and my son and son in law has a partnership. Occasionally the partnership does not have the cash to pay up a bill and I volunteer to cover their expense by paying for it from the Farm corp and they pay me back when they sell their grain. I was advised to use the Asset+ and Asset - accounts.
Thirty years ago I took some accounting courses but the older I get the slower my brain. Can you provide a couple of examples of what to do when I have paid for say their fertilizer and my fertilizer or fuel etc. and then how when they pay me how I clear the short term Asset loan off the books
Hi Brenda! Yes, you could create an asset account to use for these small loans. Often people will call it a "due to/due from" account to keep track of money going back and forth between close businesses. As for an example, let's say you used your chequing account to buy $3000 of fuel for your SIL and then later he paid you back to the same account. The first transaction would be a Withdrawal transaction for $3000, with one line: an A+ selecting that due/to from account. This represents the asset that you have of them paying you back later. When you receive payment back, it would be a deposit to your chequing account, using an A- line, again picking that same due to/from account. Effectively you are selling off that asset as they no longer owe you the money. Hope that helps and if you have any other questions, please let us know.