Loan Accounts Diagnostic Memo
In-depth account-by-account investigation of eight loan-related accounts in Xero’s Chart of Accounts. Prepared 8 April 2026 for Mat’s review before corrections are posted.
Status: Diagnostic complete. Corrections proposed. Awaiting approval.
Executive Summary
Three structural problems identified and one clean account. No “phantom” balances exist as erroneous entries, but consolidation, wrong-account coding, and legacy account cleanup needed.
Recommended corrections (priority order):
- Net off SQ-600001 against SQ-800004; write off $3,251.25 remainder → eliminates two dead accounts
- Transfer 901 Loan-Westpac balance to WL → fixes wrong-account coding
- Confirm Lumi balance against latest statement → no Xero correction needed yet
- Archive 8 zero-balance loan accounts → housekeeping
Square Capital Legacy (SQ-600001 + SQ-800004)
| Account | Balance | Type |
|---|---|---|
| SQ-600001 Square Capital Loan Payable (Legacy) | $247,618.39 Cr | Non-current Liability |
| SQ-800004 Square Loan Payments | ($244,367.14) Dr | Non-current Liability |
| Net | $3,251.25 Cr |
What happened: Multiple Square Capital loans (7 total) taken out Dec 2021–Jun 2023, recorded in SQ-600001 via manual journals. Repayments automatically deducted from Square settlements and recorded in SQ-800004 via Amaka “Spend Money” entries (553 transactions). Apr 2024: remaining Square debt fully paid using Lumi refinancing funds ($11,608.39 Superbia + $79,445.46 Pride Bar). Small cleanup journal 30 Jun 2024 cleared $710.32 overpayment.
Root cause: Two accounts used for one loan—principal in SQ-600001, repayments in SQ-800004. Never netted off after Lumi payout.
Proposed correction:
- DR SQ-600001 $244,367.14 (reduces liability)
- CR SQ-800004 $244,367.14 (clears debit balance)
Leaves SQ-600001 at $3,251.25 (could be accumulated interest, rounding differences, or genuine write-off). Recommend writing off to P&L expense (Prior Period Adjustment or Loan Write-Off), then archiving both accounts.
Westpac Loan (WL + 901)
| Account | Balance | Type |
|---|---|---|
| WL Westpac Loan of 100,000 | $100,000.00 Cr | Non-current Liability |
| 901 Loan-Westpac | ($11,575.00) Dr | Non-current Liability |
| Net | $88,425.00 Cr |
What happened: $100,000 Westpac loan recorded 14 Oct 2025. Monthly repayments of $2,315.00 began Nov 2025, but coded to separate account (901) instead of reducing WL balance. Five repayments made (Nov 2025–Mar 2026).
Root cause: Wrong account coding. Person reconciling bank feed allocates Westpac repayments to 901 instead of WL. Result: WL stuck at $100k (looks like no repayments made); 901 going negative (debit balance on liability = wrong direction).
Note: $2,315/month repayment includes both principal and interest. Without Westpac loan schedule, cannot split principal vs interest. Full amount hitting loan liability; no interest expense recorded.
Proposed Phase 1 correction (consolidate):
- DR WL $11,575.00
- CR 901 $11,575.00
Brings WL to $88,425.00 (net of repayments); zeros 901. Archive 901 after.
Proposed Phase 2 correction (fix interest allocation—requires Westpac schedule):
- Once loan amortisation schedule obtained, split each $2,315 payment into principal and interest components
- Post journals to move interest portion from WL to interest expense account (WLI)
- Set up bank rule for future repayments to auto-split correctly
Lumi Refinancing Loan (503)
| Account | Balance | Type |
|---|---|---|
| 503 Lumi Re-financing Loan | $144,890.81 Cr | Non-current Liability |
Evolution of the facility:
| Date | Description | Amount |
|---|---|---|
| 28 Mar 2024 | Initial refinancing (paid out Square Capital) | $99,000.00 |
| 30 Jun 2024 | Establishment fee capitalised | $1,790.00 |
| 30 Jun 2024 | Interest expense capitalised | $5,514.47 |
| 17 Sep 2024 | Additional draw | $20,000.00 |
| 22 Nov 2024 | Extension — rent backpayments | $25,000.00 |
| 11 Feb 2025 | Additional draw | $20,000.00 |
| 29 Apr 2025 | Major extension/refinancing | $109,585.32 |
| Total borrowed | $280,889.79 | |
| Total repaid (to 8 Apr 2026) | Weekly repayments ($889.84→$1,603.63) | ($135,998.98) |
| Current balance | $144,890.81 |
Key observations:
- Lumi balance has GROWN despite weekly repayments—total draws ($280k) far exceed original $99k refinancing
- Repayment amounts increased from $889.84/week to $1,603.63/week (likely reflecting larger balance after Apr 2025 extension)
- $109,585.32 Apr 2025 draw is largest single draw; nearly doubled outstanding balance
- Repayments coded entirely to 503—no principal/interest split. Jun 2024 journal capitalising $5,514.47 interest suggests accountant recognises interest should be separated, but only done once.
- Payment processor changed from “Lumi” to “Zai Australia” around Nov 2025 (Zai is Lumi’s infrastructure provider)
No Xero correction required—account appears recording actual loan activity correctly. However:
Action items for Mat:
- Verify balance against Lumi statement. ($144,890.81) should match Lumi’s records. If Lumi charges interest separately, Xero balance may overstate principal.
- Obtain Lumi loan schedule. Needed to determine how much of $1,603.63 weekly repayment is principal vs interest. Without this, interest expense understated and loan liability being reduced too fast.
- Assess total cost of borrowing. $280k borrowed, $136k repaid, $145k owing—total interest cost should be understood for financial planning.
Westpac Loan Fees (WLF) and Interest (WLI)
Both accounts have zero transactions and zero balance. They exist in Chart of Accounts but never been used.
Recommendation: Keep WLI—will be needed once Westpac loan schedule obtained to properly split monthly repayment. WLF can stay for future loan fees. No action required.
Intercompany Loan — POOF (900)
| Account | Balance | Type |
|---|---|---|
| 900 Loan - POOF | $124,050.84 Cr | Non-current Liability |
What happened: Legitimate intercompany loan from parent entity “Pride of our Footscray Ltd” (POOF). Account records credits (cash transfers from parent—largest: $117,500 on 10 Oct 2017) and debits (regular repayments back to parent: $554.90 fortnightly, later varying). Loan peaked at ~$299,000; gradually repaid. Balance declining through regular repayments via bank transfers.
No Xero correction required. Real intercompany liability. However:
- Confirm with accountant that $124,050.84 matches parent company’s corresponding receivable
- Check whether interest being charged on this loan (related-party loans have ATO implications if not at arm’s length)
Zero-Balance Loan Accounts (Housekeeping)
Archive these historic shareholder/director loans and legacy facilities fully repaid:
| Code | Name |
|---|---|
| 333 | Loan - Markus |
| 446 | Loan - Mathew |
| 501 | Loan - Mat |
| 502 | Loan - Square |
| 599 | Loan - Minh |
| 909 | Loan - (unknown) |
| 910 | Loan - Finance |
| 911 | Loan - Mathew |
| 912 | Loan - Maggie |
| 920 | Loan - Get Capital |
| 921 | Loan - (unknown) |
Archiving will clean up Chart of Accounts without affecting balances.
Proposed Journals
Journal 1: Net off Square Capital accounts
- DR SQ-600001: $244,367.14
- CR SQ-800004: $244,367.14
Journal 2: Write off Square Capital remainder
- DR SQ-600001: $3,251.25
- CR [P&L expense—Prior Period Adjustment or Loan Write-off]: $3,251.25
Journal 3: Consolidate Westpac loan accounts
- DR WL: $11,575.00
- CR 901 Loan-Westpac: $11,575.00
Journals NOT proposed yet (information gathering required):
- Lumi principal/interest split—needs Lumi loan schedule
- Westpac principal/interest split—needs Westpac amortisation schedule
- Loan-POOF reconciliation—needs confirmation from parent entity
Related Pages
- Loan Accounts Summary — consolidated view of all loan facilities
- Square Capital Loans Issue — phantom balance resolution detail
- Westpac — wrong-account coding fix
- Lumi — facility evolution and cost-of-borrowing analysis
- Chart of Accounts — loan account structure and naming conventions