How to report income and expenses from PPP loans


For this article, I teamed up with my colleague Diana Cohn from Corner desk to detail how to reserve income and expenses related to the SBA’s Paycheck Protection Program, or P3 Loan, from the SBA. This article does not go into detail on who is eligible or how to apply for these funds.

Instead, we’ll focus on what entries to make into the accounting software after you receive the PPP loan disbursement and start spending the funds. All of the examples use QuickBooks as the accounting software, so modify accordingly if you or your clients are using a different program.

PPP Loan Income Setup – When opening a separate account

From what we are hearing, some accountants and advisers are suggesting that companies open a separate bank account (in real life, in their bank) for the Covid-19 funds received. A separate bank account is easier to audit, avoids the mixing of funds, and creates a clear audit trail.

However, right now we hear that it is difficult to open a new bank account, with long queues and waiting times, and opening a new bank account can result in some costs (the bank may ask you to order checks). Nonetheless, this article assumes that you are able to open a separate bank account for PPP funds. Now we’ll cover what to do in QuickBooks.

Set 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 an accountable loan liability account.

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