The instructions in this article relate to the processing of Strata Loans, which is completed in Process Bank Statements. The icon may be located on your StrataMax Desktop or found using the StrataMax Search.
Overview
When a Building / Plan considers getting approval to borrow funds from a financial institution in the form of a loan, consideration of how this should be represented in the Financial Statements needs to be determined so the loan is setup correctly from the beginning.
- What are the funds for?
- Usually for large expenses when there is insufficient cash in the operating or investment account.
- Are the amounts just related to one fund?
- Normally when large expenses are required to be paid it will be related to the Sinking / Capital Works / Maintenance/ Reserve Fund.
- How will the repayments of the loan be funded?
- Income for a building is generated with the approval of levies (normal or special) for payment by Owners. Consideration of what period and frequency as well as which fund (as above) these will be applied to will need to be determined.
- Should the income / expenses be shown in the already setup fund or would it be better presented to Owners on the Financial Statements with a separate Income and Expenditure Statement?
- This can be achieved by setting up a new Trading Fund which can be named as required or relevant to the reason for the loan. Levies can also be named to be relevant and setup in Levy Invoice Codes.
Once the above is determined the accounts in StrataMax can be prepared for the initial and ongoing transactions and levies.
Setup Accounts
The general ledger (Account Maintenance) accounts required for a loan are:
| Account Name (suggested) | Account Type / | Details |
| Cash at Bank | Asset | Operating account which will receive the loan funds |
| Loan Account | Liability | Reports the amount of the loan and reduces as repayments are made |
| Interest | Expense | Interest amounts applicable to every repayment |
| Bank Fees / Charges | Expense | Initial application fee / Account fee (if applicable) |
| Principal / Loan repayment | Expense | For budgeting only. These amounts will be applied on the liability account to reduce the amount owing. |
| Income Account (as required) | Income | Setup so levies can be allocated separately to normal income. |
Trading Fund (if using)
Setup of a separate income and expenditure statement (Trading Fund setup) will allow all income and expenses related to the loan to be on a separate page of the Financial Statements.
Bank Reconciliation | Strata Loan Transactions
The following transactions are likely to occur on the bank reconciliation:
- the initial amount of the approved loan will be reflected as a receipt into the bank account.
- a loan approval fee may be automatically withdrawn.
- on-going periodic repayment amounts will be direct debited from the bank account;
- for the repayment of the principal and
- for the interest expense
- other transactions based on the Loan Agreement Schedule.
Initial Receipt of Loan Funds
Allocate to a liability account (after '0599 Liabilities' in the account code range in the Master Chart) on the balance sheet, named ‘Loan’ or something similar. It is a good idea to have a different account code if there is more than one loan taken out by the building / plan.
What to do on the Bank Reconciliation
- From Process Bank Statements, click the blue Process Bank Reconciliation icon, under the 'Actions' column to open the Bank Reconciliation screen for that building.
- Highlight the funds received and open the transaction to check the Type is ‘Deposit’ and enter the ‘Account’ as the Loan Liability account as created above, the Details can be adjusted to give clear notes on the transaction if required.
- When all items have been allocated click Auto Process.
These are the transactions that will be recorded in the accounts:
| Type | Account Name | Account | Details |
| DR (+) | Cash At Bank | Asset | $$ - Loan Amount |
| CR (-) | Loan | Liability | $$ - Loan Amount |
Loan Fees
- From Process Bank Statements, click the blue Process Bank Reconciliation icon, under the 'Actions' column to open the Bank Reconciliation screen for that building.
- Allocate the associated ‘Loan Fees’ to the correct expense account. Highlight the transaction in the Bank Reconciliation to open the transaction, change the ‘Account’ code to the appropriate expense code. i.e. Bank Fees / Loan Fees / etc,
- When all items have been allocated click Auto Process.
Example Loan Fee Transaction
These are the transactions that will be recorded in the accounts:
| Type | Account Name | Account | Details |
| DR (+) | Bank / Loan Fee | Expense | $$ - Loan Amount |
| CR (-) | Cash At Bank | Asset | $$ - Loan Amount |
Expenditure of Loans Funds
Invoices from Suppliers will be coded against the appropriate fund and may be based on approved budget items. When the payment is made to the Supplier, the funds will be spent from the Cash at Bank, as this is where the loan funds will have been deposited to.
Creditor Invoice
| Type | Account Name | Account | Details |
| DR (+) | Fund expense | Expense | $$ - as per invoice |
| CR (-) | Creditor / Supplier | Liability | $$ - as per invoice |
EFT / BPay / Cheque Payment
| Type | Account Name | Account | Details |
| DR (+) | Creditor / Supplier | Liability | $$ - as per invoice |
| CR (-) | Cash At Bank | Asset | $$ - Loan Fee |
Periodic Repayments | Principal and Interest
As the repayments of both principal and interest are separate recurring entries, these can be posted to the correct accounts. These will be split to reduce the loan liability account and increase the interest expense. A Legend could be setup to automatically allocate the transactions.
What to do on the Bank Reconciliation
- From Process Bank Statements, click the blue Process Bank Reconciliation icon, under the 'Actions' column to open the Bank Reconciliation screen for that building;
- Interest: Highlight the transaction in Bank Reconciliation and open the transaction by clicking it, enter the ‘Account’ code as the appropriate ‘interest expense’ account.
- Principal: Highlight the transaction Bank Reconciliation and open the transaction by clicking it, enter the ‘Account’ code to the Loan liability account (as created above).
Example Transactions for interest and principal
Example of the Bank Statement Report
