Journal Entries for PPP Loans, Credits and Forgiveness

October 6, 2020

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Basic Accounting General Journal Entries for Covid Related Benefits
 
** NOTE: These entries are for financial accounting purposes. Income tax treatment will vary which could create a book-tax adjustment.
 
Receipts from:
 
EIDL Grant
 

 

Dr

Cr

Cash in Checking

xx.xx

 

Other Income

 

xx.xx

 
EIDL Loan (in addition to Grant)
 

 

Dr

Cr

Cash in Checking

xx.xx

 

Note Payable – SBA EIDL

 

xx.xx

 
EIDL Loan (SBA Payments for Borrower for 6 Months)
 

 

Dr

Cr

Note Payable – SBA EIDL

xx.xx

 

Other Income

 

xx.xx

 
 
PPP Loan
 

 

Dr

Cr

Cash in Checking

xx.xx

 

Note Payable – Bank PPP

 

xx.xx

 
 
PPP Loan Forgiveness when notified by the lender
 

 

Dr

Cr

Note Payable – Bank PPP

xx.xx

 

Other Income-Gain on Debt Extinguishment (Per AICPA)

 

xx.xx

 
** Note: There are no financial accounting journal entries to the loan amount until the debtor is notified by the bank of the amount of SBA loan forgiveness. No adjustments are made to expenses. For accrual financial statements accrue interest at 1%. For Tax Purposes the date of the forgiveness entry may differ, and the credit for the forgiveness amount would be to the related expenses according to IRS guidance in effect 9/30/2020.
 

 
Journal Entries for Payroll Related Benefits:
 
Deferral of Employer Social Security Payroll Tax:
 

 

Dr

Cr

Deferred Expense (Asset)

xx.xx

 

Payroll Tax Liability

 

xx.xx

 
Deferral of Employee Social Security Payroll Tax:
 

 

Dr

Cr

Deferred Expense (Asset)

xx.xx

 

Payroll Tax Liability

 

xx.xx

 
Emergency Sick Leave or Family Medical Leave Credit
 
Note: This adjustment will vary depending on how the employer’s payroll journal entries are originally entered. If there is no adjustment to Payroll Tax Liability and all payroll taxes are posted to the expense account, replace Payroll Tax Liability with Payroll Tax Expense.
 

 

Dr

Cr

Payroll Tax Liability

xx.xx

 

Other Income

 

xx.xx

 
Employee Retention Credit
 
Note: This adjustment will vary depending on how the employer’s payroll journal entries are originally entered. If there is no adjustment to Payroll Tax Liability and all payroll taxes are posted to the expense account, replace Payroll Tax Liability with Payroll Tax Expense.
 

 

Dr

Cr

Payroll Tax Liability

xx.xx

 

Other Income

 

xx.xx

 
Section 139 Employer Disaster Payments to Employee
 

 

Dr

Cr

Disaster Fringe Benefit Expense

xx.xx

 

Cash in Checking

 

xx.xx

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