How to set up Paycheck Protection Program Loans in PowerChurch
We have been uplifted to hear of work our customers are doing to take care of and minister to those in their communities. Many have taken advantage of the Paycheck Protection Program (PPP) loans made available through the Small Business Administration (SBA).
We have had several requests asking how to set up these loans in PowerChurch. These loans would be set up as a liability account in your chart of accounts. In addition, some customers are establishing a separate bank account for the PPP loan proceeds. These new bank accounts would be added as an asset account to your chart of accounts as well.
You are going to need a loan liability account and, optionally, a new bank account for the PPP loan proceeds.
To set up these accounts in PowerChurch you would go to Accounting -> Fund Accounting -> Setup -> Maintain Chart of Accounts. Add the loan liability account and, if needed, a new asset account for the bank account for the loan proceeds.
Recording the Loan
The following journal entry will record the loan in PowerChurch:
|PPP Loan Liability||XX,XXX.XX|
|Asset account where deposited (PPP Bank Asset)||XX,XXX.XX|
Using the Money from the Loan
If you are holding the PPP loan amounts in a separate bank account, you will want to transfer the amounts from this separate account to your main operational checking account as you spend the money. After you have made the transfer with your bank, record the transaction in PowerChurch like this:
|PPP Bank Asset||XX,XXX.XX|
|Main Operational Checking account||XX,XXX.XX|
When you spend the money from your main operational account, you would record the transaction as normal. You may wish to record in the note area of the transaction that PPP funds were used to pay this amount. Do not set up different accounts to record expenses for the PPP money. This could overcomplicate your account setup and may cause confusion when comparing expenses and budgets from one year to the next.
Recording Loan Forgiveness
If you meet the qualifications, the PPP loan amount can be fully or partially forgiven. The amount forgiven will be shown as income to your church. You may want to create a new income account or use an existing miscellaneous income account.
When the loan is forgiven, the following transaction will record the loan forgiveness:
|PPP or Miscellaneous Income Account||XX,XXX.XX|
|PPP Loan Liability||XX,XXX.XX|
Making Loan Payments
If the loan was not completely forgiven you will have a balance that will need to be repaid. The following transaction will record the loan payments as you make them:
|Bank (Asset) account making payment from||XX,XXX.XX|
|PPP Loan Liability (principle amount)||XX,XXX.XX|
|PPP Loan Interest Expense||XX,XXX.XX|
PPP Loan Forgiveness Documentation
A key part of PPP is that the loan amount will be forgiven if the money is used for the intended purposes. There are many factors that go into loan forgiveness, and many of the details are still being settled. Talk with your lender about specific requirements for your loan forgiveness.
A lot of the documentation you are going to need for PPP loan forgiveness will be from sources outside of PowerChurch. For example, you may need copies of cancelled checks, utility bills, and mortgage or rent statements. Other information can be obtained from the accounting modules of PowerChurch. The following are general categories of documentation that may be requested and what reports to run to help you gather this information.
For wage information, run the Item Summary Report in the Payroll module. Check the option to "Print summary by employee" to give you a total by payroll item for each employee.
The Wage and Hour report in Payroll can help you calculate the number of full-time equivalent employees.
To document health insurance and retirement plan payments, run the Account Activity report in Fund Accounting for the specific expense accounts.
Non-Payroll Qualified Expenses
At least 75% of the PPP loan must be used for payroll purposes. Up to 25% of the loan can be used for qualified expenses like mortgage interest, rents, and utility payments. In PowerChurch use the Account Activity report for specific accounts with qualified expenses.
This is a rapidly changing situation. There is still guidance coming out on exact policy and procedures. You must wait until the end of the eight-week covered period to apply for loan forgiveness. Use this time to prepare needed documentation to apply for forgiveness when it becomes available.
This information reflects our understanding at the time it was written and should be used as reference only. We recommend that you talk to your own advisor, for the most current information or for guidance specific to your organization.
Capin Crouse is an accounting firm specializing in faith-based accounting issues. There is a link at the bottom of the article to a recorded webinar from April 22, 2020
A listing of Covid19 related resources created by Capin Crouse, an accounting firm specializing in faithbased accounting issues.
Last updated: 05/20/2020