Insurance Proceeds from Loan Collateral


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Anyone have any ideas on how to classify funds sent straight to a bank (to cover a loan) from the collateral of a business loan (home) being destroyed? I may be looking at this completely wrong, but it doesn't seem like it would be insurance proceeds to the business since the business did not receive any of the funds. I was thinking possibly capital since the home is the business owners. Any opinions are greatly appreciated! :)
 
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Nov 25, 2010
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If the home is not owned by the business, then you are correct - it is either a loan payable by the business to homeowner or a capital contribution. You would debit the loan to bank and credit the loan/contributed surplus - homeowner.
 

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