338 Note Payable - Affiliated Companies

Liabilities

Long Term

Synopsis

Account 338 is established to record notes payable to entities that share common ownership with equity owners of the dealership.

Debits

Credits

  1. Principal payments to affiliated companies

  1. Notes payable to affiliated companies

 

Example 1

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

Journal: Cash Receipts

Entry:

 

Debit

Credit

Account 201

Cash on Hand Bank

$750,000

 

Account 338

Other Notes - Affiliated Companies

 

$750,000

Example 2

Payment of monthly interest to an Affiliated Company on the note payable to them.

Journal: Cash Disbursements

Entry:

 

Debit

Credit

Account 79*

Interest - Notes Payable (Other)

$3,125

 

Account 202

Cash in Bank

 

$3,125

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 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.