How to categorize cash receive in refinance- bookkeeping

4 Replies

I've got a commercial property we just refinanced, held in an LLC. Part of the result of the refinance was extra cash. My questions seems simple but it is just evading me. As I am entering the transaction in my bookkeeping software I can't figure out how to categorize the cash deposited back into my checking account, it sure doesn't seem like income to me... Thanks for your input.

One side of the entry would be positive to bank account the other would be increasing the liability. In quick books it would be a journal entry. You may be able to enter it directly as the liability account in the deposit. I usually run a p/l report before making the entry to make sure the income doesn't go up because I seem to always enter it backwards when I try to reason it out. Does that work?

Originally posted by @Ed Emmons :

One side of the entry would be positive to bank account the other would be increasing the liability. 

I knew I was making it overly complicated.  It is always nice to just have someone spell it out for you... thanks.

Promotion
Guaranteed Rate
Guaranteed Rate is a top mortgage lender
Save $1,290 on your next home – no lender fee*
Get special perks like $1,290 in lender fee savings when you buy a second home with Guaranteed Rate.
Apply Now

Journal entry:

DEBIT: Cash, old loan

CREDIT: New loan

In the Statement of Cash flow, this is going to be cash from financing activities, and not operating activities (operating activities comes from your actual business)

The above keeps the refi on the books.

Another  approach for a Cash-out refi is

  • DB checking account
  • CR Owner Distribution

the refi is off the books and you can reinvest, go to Rome, do whatever ...