Getting Cash Flow report to show return of principle on a loan I own.

Elmo Deek

How can I do this? I've tried to recategorize the loan account to the various "account intent" choices. None of them work.

Tom Young

At this point, with the loan paid off, you simply need to get rid of the remaining balance of the loan.  You can do that by going to the loan Account, entering the remaining loan amount as a "Decrease" and in the Category box entering the name of the loan Account, surrounded by square brackets: [Name of Account].

That will "magically" bring the loan balance to $0 without affecting any other Account or Category in your file.  Then hide that Account. 

bmciance

You need to customize the report (click the gear) to show transfers (on the advanced tab).  Just be aware that it may show more that what you are looking to show.  You can try the different options to see if you can get it to show exactly what you want.

Elmo Deek

The only thing that worked was to recategorize the split in my payment to show the principle part as long term capital gain distribution, which is what it was. This being the case because the loan represented a buyout of my business interest in the company I sold.

Tom Young

Elmo Deek said:

The only thing that worked was to recategorize the split in my payment to show the principle part as long term capital gain distribution, which is what it was. This being the case because the loan represented a buyout of my business interest in the company I sold.

That really doesn't sound right.  If you're using the installment method of accounting for the gain on sale then you'd apply a "profit percentage" to the amount of principal received to determine gain, you wouldn't recognize ALL of the principal as gain.  And, if you're using that approach,  you shouldn't have the loan in your balance sheet at all.  When you receive a payment you'd recognize the interest as income and the principal as income, and that's it.

I set up a super simple file with only a checking Account and a loan Account, then ran a Cash Flow report for the year.  Right out of the box the Cash Flow report only showed the interest as inflows:

Then I enabled transfers (Exclude self-transfers) and got both the interest and the principal to show up in the Cash Flow report.

Now if you have lots of Accounts with transfers you'll need to fine tune the Cash Flow report.  That generally means unchecking the Account where you want to see the transfer from the Account tab of the Customization window but making sure the Account is checked as a "Category" under the Category tab of the Customization window.

Elmo Deek

Thanks Tom,

Here's the total story. in 2006 I buy my percentage ownership in a company for $0.55-55%.

On 12/31/2014 I sell it for $2M. (it's a long story). If they paid me cash; that cash would be all capital gains. However, we all agree that a 7 year loan, at 1.64% APR amortized quarterly and paid quarterly is the way to go. The principle part of the quarterly payment is all long term capital gains, and the interest part is ordinary income.

You tell me, how do I set that up so that the loan gets paid off and the principal part of the payment shows up as income in the Cash Flow report?

Incidentally, when the loan got paid off, I closed the loan account. Even though, I was able to recategorize the principle to long term cap gains distribution instead of a payment to principle. As a result, the unpaid balance has not been reduced and it remains at $2M. So I agree with you, there's got to be a better way. Except your idea above, doesn't work in my case.

Thanks again for your continued effort to solve this for me.

Tom Young

At this point, with the loan paid off, you simply need to get rid of the remaining balance of the loan.  You can do that by going to the loan Account, entering the remaining loan amount as a "Decrease" and in the Category box entering the name of the loan Account, surrounded by square brackets: [Name of Account].

That will "magically" bring the loan balance to $0 without affecting any other Account or Category in your file.  Then hide that Account. 

Elmo Deek

Bingo. A very sincere thank you for your help. Best wishes for a happy and healthy holiday season.

Lee