[Canada] COVID-19: How to bookkeep your CEBA loan

If you’ve received a Canada Emergency Business Account (CEBA) loan, here’s how to bookkeep it, from start to finish.

The Canada Emergency Business Account, or CEBA, is a loan program created by the Government of Canada which is up to 25% forgivable, depending on how the funds are spent. And now your CEBA loan has been approved: congratulations! Here’s how to record it.

You may want to consider opening a separate bank account for the CEBA loan deposit, to simplify the tracking of how you use the loan funds.

To record the initial loan deposit:

1. Under the Accounting tab in the left-hand navigation menu, select Chart of Accounts, then click the Add a New Account button.
2. In the Account Type dropdown, scroll down to Liabilities & Credit Cards and select Loan and Line of Credit.
3. Enter a name that you'll easily recognize (for example, "2020 CEBA loan"). You can also include an account number and a description, if you'd like. Click Save. 
4. Now head to the Transactions page. Click Add income to create a transaction.
5. For the Account, select the bank account the loan proceeds were deposited into.
6. In the Category dropdown, select Transfer from Bank, Credit Card, or Loan, select the new CEBA loan account you just added, and then click Save. 

If you’ve connected your bank account to Wave, it will import the deposit transaction showing the loan funds available in your account. Instead of creating a new transaction, you can simply categorize the imported transaction to your new loan account.

The loan is interest-free until December 31, 2022, and if you pay 75% of the loan by December 31, 2022, the remaining 25% of the loan will be forgiven. Let's look at how to record those steps.

To record a principal payment on the loan:

1. Head to Accounting and then Transactions; either find the payment transaction imported from your bank account connection, or click Add expense.
2. In the transaction details, enter or verify the account the payment was made from, the date, and the amount of the payment.
3. In the Category dropdown, select Transfer to Bank, Credit Card, or Loan, select the new CEBA loan account. 
4. Click Save.

To write off the forgivable portion of the loan:

1. Head to Accounting and then Transactions; click Add income.
2. Enter a description, choose the date, and enter the amount of the forgiveness in the Total amount field.
3. Open the Account dropdown and select the CEBA loan account.
4. In the Category dropdown, scroll down to click Add a new category.
5. In the screen that pops up, open the Account Type dropdown and scroll down to Income; select Other Income. 
6. In the Account Name field, enter something specific (for example, “CEBA loan forgiveness”).
7. Click Save, and the transaction will be categorized to this new account. 

The forgiven amount of the loan may be taxable, so it'll be important to keep this amount categorized separately from the other revenue your business earned. You'll also need to use the loan funds for allowed expenses, so keep careful track of how you spend the money.

If your CEBA loan converts to a 3-year, 5% annual interest loan, you can record those payments as you would with any other loan.

Recording regular loan payments:

1. Head to the Transactions page. Click Add expense, enter the bank account for the payment with the Account dropdown, select the Date of the payment, and enter the payment amount into the Total amount box. Or, find the imported expense transaction in the bank account, and select it to open the transaction details pane.
2. Below the Category dropdown, click the Split this withdrawal button.
3. In the Category 1 dropdown menu, select the CEBA loan account, and enter the principal payment amount into the Amount box.
4. In the Category 2 dropdown menu, select Interest Expense, and enter the interest amount into the Amount box.
5. Click Save, and you're done!

Additional resources:

• Wave's COVID-19 blog page
• Wave Payroll CEBA knowledge page
• Canadian government FAQs on the CEBA program