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Hi, I have an adjusting entry question. I have a balance remaining on an equipment loan that has been paid in full a couple of years ago. I must have entered the initial loan amount incorrectly and now would like to zero out that account. Can you tell me what account I would use to make this correction? Thanks for your time.
Hi Chris!
Are you are corporate farm, or a personal farm? The answer really depends on this.
If you are a personal farm, then you can simply go into your Transaction Entry screen. Set up a withdrawal for the end of the year, leaving the Total as 0.00. On the first line, you will enter an L-, and type the amount you want to reduce your loan by in the Amount. On the second line, you will enter an EQ to account 3998 (Retained Earnings), which will balance the transaction for you automatically.
I do not recommend doing this if you are a corporation. Instead, you will want to make sure your accountant gives you an adjusting journal entry to take care of the loan balance properly. Retained Earnings is an important number to a corporation, so we don't want to post there unless it is absolutely necessary.
I hope this helps!