CERB loan

Question

Hi, I'm sure this will become a popular question due to the current covid situation. Our business has applied for the Government Canada Emergency Business Account for $40,000. How should this be set up in Sage 50 for bookkeeping purposes. Please provide detailed instructions. Also, once the loan is paid back, how should the forgivable portion of the loan be documented. Thank you.

Richard S. Ridings · Accepted Answer

The CEBA would be set up as a Liability account. Just set up a new account as a liability and when it is used, then post an entry to it. During 2020 the balance can go up and down to the maximum of $40,000 but starting in 2021, the balance can only go down if you make payments. The exact method of use will depend on the bank issuing the loan. RBC seems to have it set up as a VISA Credit Line while TD seems to deposit the full $40,000 at one time into the bank account. I don't know what BMO does yet because I have not seen statements. 
 If and when there is a forgiven portion, ideally there would be paperwork to notify you about it and it would then be recorded as Revenue. That won't happen until sometime at the earliest in 2023 based on what I have been reading. I would at least set up an account that will be used for it, the 10% Temporary Wage subsidy and the CEWS if all are applicable. Some people might set up an account for each subsidy.

Richard S. Ridings · Answer

Yes, I would set up the liability account. Double-entry bookkeeping requires us to post to two accounts. Debit the bank, credit the ....... It can't be revenue because you owe it back to the CRA. The "What you owe" section of the books is liabilities. Only at the time, if and when they forgive a portion will that portion be revenue and therefore you will debit the liability and credit revenue.

Sage 50 Canada

CERB loan

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