Paying a Loan with Inventory

[dryice]

I have an outstanding loan against the business. The loan holder is also a friend and has been getting taking payment in the form of inventory. Up until today I have been keeping track of it all in a spreadsheet. I would like to see it all on the Balance Sheet.

I have setup a "Payment Item" to Deposit to an account setup as an
"Other Current Asset".

Would I then just go to the Ledger for said "Other Current Asset" account and put in each historical transaction to bring it up to the current negative balance?

Then as she buys/orders inventory items it would deposit into this account until it reached 0?

[Joe Williams]

On an invoice, enter the inventory item as you would for a normal sale, then on the last line enter the payment item that goes to the loan asset account.
Be sure to check the loan account balance before entering the invoice so you do not go negative on the loan account.