I created a nominal account 1251 “Intercompany Loan a/c” under account type “Assets and Liabilities (0001 - 2999)” in Chart of Accounts a while ago. This results in loan advances showing as + in current account and - in loan account and COA. Repayments show as - in current account and + in loan account and COA. Shouldn’t the + and - be inverted in COA account? If so, can anyone tell me how I change COA account 1250 to be a Liabilities type account so the COA account values are inverted?
What do you consider to be “+” and what do you consider to be “-“? Is your company the borrower or the lender?
In CoA terms, assets are debit balances and liabilities are credit balances. So a “money in” transaction in the bank account view is a debit on the CoA, and money out is a credit.
Your bank account is an asset - debit - for you (it’s a place you store your money), but a liability - credit - for the bank (they have to give you the money when you ask for it). The statements the bank sends you are from their perspective, which is why it’s reversed compared to QuickFile.
“+” is money in and “-” is money out of the account.
So I take out a loan then the uploaded bank statements creates a “+” amount in current account and that is tagged to a “-” balancing amount in the intercompany loan account. When I pay the loan back the opposite happens. So, if for example my company took out a £500 loan and paid back £350 then the intercompany loan account would have a balance of (£150). I created COA code 1251 “Intercompany Loan a/c” which in this case would have a balance of (£150). I thought 1251 was a Liabilities account but maybe it’s a Assets account. I created account many years ago I can’t remember how I created it now. Am I right in thinking that, if it is a Asset account, the amount should be (£150) and if liability account then +£150?
How do I check if account 1251 is a Asset or Liability account?
I’m not an accountant but my understanding was that a positive asset means a negative liability which implies that the lender owes me £150 which is incorrect. Is my understanding wrong? This is why I was wondering how can I check what type of account COA code 1251 is, and then change 1251 from type Asset to type liability if not already.
“Assets & liabilities” is one category in QuickFile, there’s no separate asset accounts vs liability accounts. If the balance is a net credit then the account represents a liability, if the balance is net debit then it represents an asset.
The nominal level reports always use green for credit and red for debit - in the P&L nominals it looks more correct because credit in P&L means income and debit means expenditure.
The possible confusion is that when you look at code 1251 on the balance sheet the liability balance shows as green (because it’s credit in nominal terms), but when you look at the same nominal in the bank accounts section it shows as overdrawn. Both of these views are correct.
Basically don’t think of “credit” and “debit” as representing plus and minus necessarily, the way I keep it straight is to think of credit as “where the money came from” and debit as “where the money went”. For sales the money came from the customer (so the sales code is credit) and went into your bank account (so money in on a bank account is debit). For a loan the money came from the lender, so the nominal representing that lender should be a credit balance, and when you make repayments that’s money moving from your current account (money out = credit) and going to (debit) the lender.
Ah good. So in COA report my COA code 1251 (Intercompany :Loan) is correct to show a balance in green (credit) as that is the balance of loan yet to be paid back to lender.
Glad I don’t have to change anything. Many thanks for explaining in detail.