Construction Loan

[Melinda O.]

We are starting a building project and taking out a loan. The bank will be issuing the checks (draws on the loan) to the contractors. How do I set up the loan account? We will be borrowing up to $1.2 million and I would like to keep track of the draws made on the loan as we go along.

[Jeff]

Usually people set up a construction in progress asset account and a Construction Loan Liability account.

As you make draws on the loan, you credit the loan liability and debit the construction in progress asset account.

[Melinda O.]

Ok, thanks for your help.