Loan to camp

[F12Mahon]

A local christian camp has approached individuals about loaning them money. The benefit to them is better interest rate than a bank loan. The benefit to the loaners is better interest rate than banks are giving. Our church is participating in loaning them money. Our pastor is on the board. I searched and found three threads where the church was loaning the money. Two recommendations were to set it up in account receivables and one as a negative liability.

I don't know if we will receive monthly interest or yearly interest payment. Does interest pay frequency make a difference which way to record it? Is the interest considered taxable?

Thanks,

[JohnDMeyers]

Since PowerChurch doesn't do "receivables" in the cash accrual sense, I would probably do the "negative liability" option. It kind-of says that "money is due to the church".

Lend the camp $1000:
CR 01-1110-000 checking $1000
DB 01-2410-000 principle due from camp $1000

Receive a payment of $105.00 where $100.00 is principle and $5.00 is interest:
DB 01-1110-000 checking $110
CR 01-2410-000 principle due from camp $100
CR 01-4410-000 loan interest $100

This interest is in the same category as dividend income from a bank, I think. Check with a CPA on tax issues.

Also, the accounts are the same whether the payments are monthly or yearly.

[F12Mahon]

I was thinking some more about this and I wondered if It could be treated the same as a security deposit? Listed under other assets? Is loaned money an asset or a negative liability? I'm thinking more an asset or is it a distinction without a difference?

[JohnDMeyers]

You could show it as an asset. I would label it something appropriate, like "money to be received", which is as close to a receivable as you can get in a cash system.

The transaction for lending the money would simply be:
CR 01-1110-000 checking $1000
DB 01-1410-000 money-to-be-received $1000

and payments received would look like this:
DB 01-1110-000 checking $100
CR 01-1410-000 money-to-be-received $100

[Matt]

I would agree that this should be recorded as an asset. It really is a type of investment. I would recommend that this be recorded as an asset in the Investments category.