A Plus Business Solutions, Inc.

Setting up a new bank account for PPP Loan Tracking

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Summary:  This method involves setting up a new traditional bank account and depositing the PPP Loan funds into that account.  Expenses eligible for forgiveness (i.e. payroll, rent) can be paid from the existing bank account (let’s call it “Checking”) and then the funds can be transferred from the “PPP Loan” account to the “Checking” account to reimburse the “Checking account” for those PPP expenses paid.

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Advantages of using this method – it’s easy to see at a glance how much money remains from the PPP Loan funds.  It leaves a clear audit trail and avoids co-mingling of PPP funds with operating expenses.

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Limitations in QuickBooks reporting – A QuickBooks report of the “PPP Loan” bank register will show the monies that came out of this “PPP Loan” account, but it won’t provide a total of the different types of expenses (payroll, rent, etc.) so you will need to use a separate spreadsheet or ledger to track what the expenses are for.  This will be important since 75% of qualifying expenses must be used for payroll costs to be eligible for PPP Loan forgiveness.   Using this method combined with the Class Tracking method (explained later) is an excellent way to provide both an easy view of how much money is left and how those expenses were spent (and what % of the total each expense represents).

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Cautionary Note:  You want to make sure to transfer the correct amount for payroll expenses.  Payroll checks and direct deposit drafts from the bank account are net payroll checks so if you transfer funds from the PPP Loan account to cover the exact amount of the net paychecks that came out of the Checking account you will not be accurately tracking payroll costs. (see Recording payroll #7 below).

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Alternative to setting up a new bank account:  If you have not set up a new traditional bank account you may want to use the “subaccount” method instead to create a register for PPP expenses. (see next section)

 

How to use the "Setting up a New Bank Account" method:

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• Create a new Long Term Liability account called “PPP Loan Payable” *

  • Go to Lists at the top menu then Chart of Accounts. 

  • Select Account in the bottom left corner then New.

  • Select Other Account Types, Long Term Liability then Continue. 

  • Name the account something like “PPP Loan Payable”. Do not enter an opening balance.

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* It is recommended to set up the loan as a Liability until it is determined how much of the loan will be forgiven.  If some or all of the loan is forgiven you can create an “Other Income” type account called “PPP Loan Forgiveness” and make a Journal Entry to Debit the “PPP Loan Payable” liability account and Credit the “PPP Loan Forgiveness” other income account.

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• Set up the new Bank Account in QB​

  • Select Account in the bottom left corner then New.

  • Select Bank then Continue.  Name the account something like “PPP Loan Bank Account” and fill out any other information you want to.  Do not enter an opening balance.

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• Go to Lists at the top menu then Chart of Accounts. 

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• Record the Deposit of the PPP Loan funds received

  • Go to Banking at the top menu then Make Deposits.

  • Deposit To = the newly opened “PPP Loan Bank Account”.  (Note: if there are other payments to be deposited just hit Cancel.)  Enter the date the funds were deposited

  • Received from = the lender you received the funds from (set up a new vendor if needed)

  • From Account = “PPP Loan Payable”.  Enter memo and amount.

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• Continue to pay non-payroll expenses out of the regular bank account (let’s call it “Checking”) and record transactions in QB as you normally would. Make a note in the memo section that the expense is for PPP Loan and what it is.  Keep a spreadsheet or ledger to track PPP expenses that will need to be reimbursed by the new “PPP Loan Bank Account”. 

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• Payroll can be recorded in QB several different ways depending on whether it is processed through an outside payroll processing service or using QuickBooks Payroll service.    No matter how the payroll is recorded though it’s important to remember that the amount drafted from the bank account (direct deposit, paychecks, taxes) will not always be an accurate reflection of those payroll costs that may be eligible for PPP Loan forgiveness. For example, employer FICA and FUTA are not eligible but SUTA is.  It is primarily your payroll reports that will prove what you spent on payroll, not the activity in the bank account.  However, whenever possible make sure that you transfer money for payroll reimbursement it is the correct amount. 

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• Reimbursements -To record the reimbursement transfers in QB go to Banking at the top menu and then Transfer Funds.  The Transfer from account is “PPP Loan Bank Account” and the Transfer to is “Checking”.  Make note of what the transfer was for (i.e. a $600 transfer could be for $500 rent, $100 utilities).

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• Payroll reimbursements – it is best to reimburse payroll expenses separately from the non-payroll expenses such as rent.  It will leave a cleaner audit trail and be easier to track. 

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• Reporting:  There are 2 ways to run a bank activity register – the first will give you the information but the report is not able to be modified.  if you need more information you will need to print report #2.

  • Report 1 – go to Banking at the top menu, Use Register and the select “PPP Loan Bank Account”.  Click on the Print button in the top left corner, enter dates and OK (don’t click on “Print split details”).   This report will print the entire bank register but it cannot be modified so if you need additional information you will need to run Report 2.

  • Report 2 – go to Reports, Company & Financial then Balance Sheet Standard.  You should see the “PPP Loan Bank Account” with a balance listed on the right – doubleclick on that amount.  This will pull up a Transactions by Account report which you can Customize to suit your needs.  Here’s a sample report after some customization:

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