We’ve been receiving several questions on how to handle the recording of the CARES Act Paycheck Protection Program (PPP) Loans/Grants, as well as Economic Injury Disaster Loans (EIDL) in QuickBooks Online software. Given that these loan programs are new, rapidly changing, and in some cases may require special tax treatment, we thought we’d share the approach we’ve been taking with our bookkeeping clients.
There are other options available for recording this activity, especially if your QuickBooks Online subscription includes Class or Location tracking, but this is an approach available for all QBO subscription tiers. There are also additional steps available if you’re using QBO Payroll that can help automate some of your payroll records. Questions about something in this video? Feel free to contact our office – we offer free 30 minute consultations, as well as additional QuickBooks and QuickBooks Online training @ $150/hr.
If you’re not a fan of videos, and would rather get the “TL:DR” version – here it is. We’re recommending that non-grant disbursements of PPP and EIDL monies be recorded as short or long-term liabilities, and operating/payroll/etc expenses be coded to sub-accounts set up specifically to track any expenses that qualify under the programs. Once the PPP funds have been approved to be converted into a grant, we recommend using a Journal Entry transaction to reclassify this liability to a “CARES ACT INCOME” account on the Profit and Loss. This allows your tax pro/CPA to easily identify PPP/EIDL activity on the face of the financials, while still allowing the books to be used for operational analysis and management of the business. EIDL Loans (since they do not qualify for grant conversion) stay on the books as a liability, and payments are made against them just like a Note Payable/Mortgage/Auto Loan/etc.