337 Other Notes - Owners

Liabilities

Long Term

Synopsis

Account 337 is established to record notes payable to equity owners of the dealership.

Debits

Credits

  1. Principal payments to current owners of the dealership

  1. Notes payable to current equity owners of the dealership

 

Example 1

Record the receipt of funds from the owner intended to be part of the long term permanent capitalization of the company.

Journal: Cash Receipts

Entry:

 

Debit

Credit

Account 201

Cash on Hand

$500,000

 

Account 336

Other Notes - Owners

 

$500,000

Example 2

Payment of monthly interest to the owner on the note payable to her.

Journal: Cash Disbursements

Entry:

 

Debit

Credit

Account 79*

Interest - Notes Payable (Other)

$2,083

 

Account 202

Cash In Bank

 

$2,083

Note:

* = Interest should be allocated across departments based on methods described in Distribution of Expenses section of this manual.

Comments

A credit balance represents the liability on the obligations.

All note balances need to be supported by promissory notes.  

Amortization schedules should be maintained to allocate the principal and interest

payments for notes with blended periodic payments due.