By now I’m sure most of you have heard about the Paycheck Protection Program (PPP). Several people who received money under the program have asked about the best way to account for the money in Sage 50, so I thought it would a good topic to address here.

Most lenders are having PPP recipients setting up a new bank account for the loan proceeds, so you’ll need to set up a new cash account in Sage 50. To set up the new account, go to the Maintain menu and choose Chart of Accounts. First enter an Account ID (account number) that is close to the number of your other cash accounts. Next enter a description such as PPP Bank Account. Finally make sure that the Account Type is set to Cash.

Even though your intent is to get this loan forgiven, it is still a loan. So the next step is to set up a liability account to track the balance. In the Maintain Chart of Accounts window enter an account ID (if information for the PPP bank account is still displayed, click the New button first). If you’re not sure what number to use look at the existing accounts with an account type of “Other Current Liabilities” and find any available number in that range. Enter an account description such as PPP Loan Payable. Finally, set the account type to Other Current Liabilities. That step is extremely important to get the account to appear in the right place on your balance sheet.

To record the deposit of the funds in the new bank account go to the Tasks menu and choose Receive Money. Skip over the Customer ID field and type the name of the bank or financial institution that processed the loan into the Name field.
At Check/Reference No. enter something like PPP Loan Funds. Enter the date the money was deposited. Set the cash account to the new PPP account you set up in the first step (or whatever account the money was deposited into). Then on the Apply To Revenues tab enter a description of the transactions, set the GL Account to the liability account you set up in the previous step, and enter the full amount of the loan in the Amount field.

You could pay approved costs directly out of the new bank account. But for convenience most people are recommending that you continue to operate out of your regular checking account and transfer money from the PPP account to cover each approved expenditure. To record the transfer of funds, go to Tasks > Payments (or Tasks > Write Checks if you prefer that method). Enter the vendor ID for the bank or financial institution that processed your loan (If they aren’t currently set up as a vendor, create a new vendor ID for them first.) If you wrote a check to transfer the money enter the check number at Check/Reference No, if you made an electronic transfer, enter something such as EFT followed by the date. At Date enter the actual check or transfer date. Make sure the Cash Account is set to the new PPP bank account. On the Apply to Expenses tab (assuming you used the Payments window) enter a description of what costs this transfer is for and set the GL account to the bank account you transferred the money into (usually your regular checking account). If you used the Write Checks screen instead, you’ll use the Expense Account field for the account the money was deposited into.

To keep your record keeping simple, I recommend making a separate transfer for each covered expense rather than lumping them together into one transfer.

Eventually, once you know how much of the loan will be forgiven and whether or not any interest will be owed, a general journal entry can be used to adjust the balance of the PPP Loan payable account and recognize any forgiven amounts as other income.