Some companies need to borrow money from time to time to finance capital projects like new buildings, facilities, or product research and development. When your business takes out a loan, you can account for the loan as a liability and monitor each loan payment to reduce the liability. Set up a liability account for a short-term or long-term loan in QuickBooks business accounting software to record and monitor the loan deposit amount and all loan repayments.
Liability Loan Account
Sign in to your account using your QuickBooks online password to build a liability loan account. Then take the following steps:
- In the top menu, choose “Lists.”
- In the context menu, choose “Chart of Accounts.”
- Below the list of accounts, click the “Account” button.
- From the pull-down menu, choose “Fresh.”
- “Business,” “Lists,” and then “Chart of Accounts” are the options.
- Select “New” from the context menu after right-clicking on any position on the list.
- To extend the list of available account forms, select “Other” from the accounts list and then click the down-arrow button.
You now have the choice of choosing the loan form. Select “Other Current Liability” for short-term loans with a repayment period of one year or less, or “Long-term Liability” for loans with a repayment period of more than one year. Select “Continue” from the drop-down menu.
In the appropriate fields, give the accounts a name and a reference number. Remove the balance from the equation and set it to zero. Select “Save and Close” from the drop-down menu. Your loan has been entered into the scheme.
Deposit the loan amount
To deposit the loan number, go to the main menu, pick “Banking” and “Make Deposits” from the context menu. If the Payments to Deposit window appears, close it by clicking the “Cancel” button.
In the Make Deposits slot, choose the loan’s deposit account. In the “From Account” tab, type the name of the liability account you generated to monitor the loan. In the “Number” column, type the loan amount in the field. Select “Save” from the drop-down menu.
Keeping Track of Quickbooks Loan Payments
To ensure that the company’s finances are up to date at the end of the fiscal year, it’s a good idea to enter loan payments regularly. To do so, go to the main menu and pick “Banking,” then “Write Checks” from the background menu. In the Write Checks window, enter the payee name and repayment sum in the appropriate fields.
In the Write Checks window’s information section, assign the interest portion of the loan repayment to your chosen expense account. The remainder of the payment, also known as the principal, should be transferred to the liability account you generated to keep track of the loan.
If you want QuickBooks to enter this payment automatically at regular intervals and issue a payment reminder, click the “Edit” button and then select the “Memorize Check” option. Quickbooks recommends clicking the “Save and Close” button to save the transaction and close the window.
How to enter a long term loan in QuickBooks
In QuickBooks, you’ll need to record a loan. Have you taken a loan? You may create a liability account in QuickBooks Online to monitor the loan and its payments. This account keeps track of your debts.
Here’s how to build a liability account to keep track of your loan. We’ll also show you how to deposit the funds from the loan into your bank account.
Step 1: Create a liability account to monitor your debts: To begin, create a liability account to track the loan:
- Pick Chart of Accounts from the Settings menu.
- To make a new account, click New.
- Select Non-Current Liabilities from the Account Type dropdown.
Please note that you need to select Current Liabilities instead of paying an before the end of the current fiscal year.
- Pick Notes Payable from the Detail Type dropdown (or Loan Payable).
- Give the account a meaningful title, such as “car loan” or “Covid-19 relief loan.”
- When do you want to start keeping track of your finances? Fill in the sum in the account and the as of the date in the Balance sector. If you’re going to start tracking right away, enter today’s date.
- Close the window after selecting Save.
Step 2: Keep track of the money you received from the loan: You now have a bank account with the whole loan balance in it. You will use this account to document any payments you choose to make against the loan. Follow the steps below depending on how you plan to use the loan funds:
If you intend to deposit the loan into your bank account immediately, If you want to bring all of the loan money into the bank, follow these steps:
- Select + New.
- Choose a journal entry.
- Pick the liability account you just built from the Account dropdown on the first line. In the Credits section, enter the loan number.
- Pick the required bank account from the Account dropdown on the second side.
- In the Debits section, enter the same loan number.
This deposits the total amount of the loan into your bank account. You may choose your bank account as the payment account if you report expenses or transactions.
Step 3: Make a note of loan repayment: Follow these steps to document each repayment when you’re ready to pay back the loan:
- Select + New.
- Choose Cheque as your payment method.
- If you’re sending a physical check, provide a check number. Enter Debit or ETF in the Cheque # area whether you’re using a direct withdrawal or an ETF.
Then, in the Category Details section of the check, write the following:
- Pick the loan’s liability account from the Category dropdown on the first section. After that, type in the payment number.
- Pick the interest expense account from the Category dropdown on the second line. Then enter the sum of interest.
- Add any extra fees for additional lines. From the Category dropdown, select the relevant accounts.
- Click Save and Close when you’re done.
In conclusion, QuickBooks Desktop software helps you managing the finances of a particular organisation. In this specific blog, you will know more about how you can enter a loan in different versions of QuickBooks Desktop software. I hope this blog helps you understand how you can enter a loan in QuickBooks and be worth your time.