Distribute funds from loan after all cash purchase.

Cal Matt

I purchased a property with two partners for cash and set up accounts for each partner to track the investments. We now got a loan on the property and the proceeds from the loan went to pay down the initial investments. When I set up the loan, how do I show the funds going into the three accounts for the investors?

Tom Young

If you're going to try and account for a partnership you'd be better off using a different accounting product than Quicken as Quicken just doesn't handle this situation very well, and this is an example right here.

Also you don't say if the investment accounts you've set up are "liability" Accounts (somewhat equivalent to partners' "capital Accounts) or "assets."

In an accounting system geared up for partnerships your initial establishing entry would have been something like:

Debit (increase) Partnership Checking Account  $XXX,XXX

Credit (increase) Partner A's Capital Account     $AAA,AAA

Credit (increase) Partner B's Capital Account     $BBB,BBB

Credit (increase) Partner C's Capital Account     $CCC,CCC

Or, if each partner paid their cash directly into escrow you'd have made an initial entry along the lines of:

Debit (increase) Investment Property Account   $XXX,XXX

Credit (increase) Partner A's Capital Account     $AAA,AAA

Credit (increase) Partner B's Capital Account     $BBB,BBB

Credit (increase) Partner C's Capital Account     $CCC,CCC

Going back to the first example, (which assumes partners pooled their money in a partnership checking account), your second entry would be:

Debit (increase) Investment Property Account       $XXX,XXX

Credit (decrease) Partnership Checking Account  $XXX,XXX

zeroing out the cash Account.

You end up at the same place either way and, obviously, you can't make these entries in Quicken because Quicken doesn't have "Capital" Accounts for individual partners.

Then, assuming your loan was for that same $XXX,XXX as the purchase price and the load proceeds were distributed directly to the three partners your entry there would be:

Debit (decrease) Partner A's Capital Account     $AAA,AAA

Debit (decrease) Partner B's Capital Account     $BBB,BBB

Debit (decrease) Partner C's Capital Account     $CCC,CCC

Credit (increase) Loan Account                            $XXX,XXX

zeroing out each partner's Capital Account and leaving you with a balance sheet that looks like:

Assets

Investment Property Account       $XXX,XXX

Liabilities and Capital

Loan Account                               $XXX,XXX

Partners Capital                           $  0

You can't really do this (very well) in Quicken.

If your investment Accounts set up in Quicken are some sort of asset Accounts that you set up more or less as "one sided" entries then there's really not much you can do with the loan proceeds except set up the loan as a liability Account using the Quicken loan wizard, also a "one sided" entry.  (Quicken doesn't really make one sided entries; the offset always is to the [invisible] equity Account.)  You'll have a balance sheet where assets = liabilities and each partner's Account will represent their share of the assets.

Tom Young

If you're going to try and account for a partnership you'd be better off using a different accounting product than Quicken as Quicken just doesn't handle this situation very well, and this is an example right here.

Also you don't say if the investment accounts you've set up are "liability" Accounts (somewhat equivalent to partners' "capital Accounts) or "assets."

In an accounting system geared up for partnerships your initial establishing entry would have been something like:

Debit (increase) Partnership Checking Account  $XXX,XXX

Credit (increase) Partner A's Capital Account     $AAA,AAA

Credit (increase) Partner B's Capital Account     $BBB,BBB

Credit (increase) Partner C's Capital Account     $CCC,CCC

Or, if each partner paid their cash directly into escrow you'd have made an initial entry along the lines of:

Debit (increase) Investment Property Account   $XXX,XXX

Credit (increase) Partner A's Capital Account     $AAA,AAA

Credit (increase) Partner B's Capital Account     $BBB,BBB

Credit (increase) Partner C's Capital Account     $CCC,CCC

Going back to the first example, (which assumes partners pooled their money in a partnership checking account), your second entry would be:

Debit (increase) Investment Property Account       $XXX,XXX

Credit (decrease) Partnership Checking Account  $XXX,XXX

zeroing out the cash Account.

You end up at the same place either way and, obviously, you can't make these entries in Quicken because Quicken doesn't have "Capital" Accounts for individual partners.

Then, assuming your loan was for that same $XXX,XXX as the purchase price and the load proceeds were distributed directly to the three partners your entry there would be:

Debit (decrease) Partner A's Capital Account     $AAA,AAA

Debit (decrease) Partner B's Capital Account     $BBB,BBB

Debit (decrease) Partner C's Capital Account     $CCC,CCC

Credit (increase) Loan Account                            $XXX,XXX

zeroing out each partner's Capital Account and leaving you with a balance sheet that looks like:

Assets

Investment Property Account       $XXX,XXX

Liabilities and Capital

Loan Account                               $XXX,XXX

Partners Capital                           $  0

You can't really do this (very well) in Quicken.

If your investment Accounts set up in Quicken are some sort of asset Accounts that you set up more or less as "one sided" entries then there's really not much you can do with the loan proceeds except set up the loan as a liability Account using the Quicken loan wizard, also a "one sided" entry.  (Quicken doesn't really make one sided entries; the offset always is to the [invisible] equity Account.)  You'll have a balance sheet where assets = liabilities and each partner's Account will represent their share of the assets.