How to Record a Loan Receivable in QuickBooks Desktop & Online?

How to Record a Loan Receivable in QuickBooks Desktop & Online?

Loan receivable is basically an amount owed by your customer. QuickBooks allows you to record the loan receivable. The procedure of recording the loan receivable can be different depending on the type of loan that has been applied. Therefore, we will share here complete information and teach you how to record a loan receivable in QuickBooks Desktop and QuickBooks Online. Let’s read ahead!

How Do I Record a Loan Receivable in QuickBooks?

Before you record the loan receivable in your QuickBooks account, it is important to determine the purpose of recording the loan. There can be two different scenarios in which you may want to record the loan to your customers. For instance,

  • When the loan amount is going to be used to close the open invoices.
  • When the loan amount is going to be used for other purposes and you intend to provide a check.

In the following discussion, we will show you how to record a loan receivable in QuickBooks Desktop and Online for both the cases discussed above.

Case 1: How to Record a Loan Receivable in QuickBooks Online to Close the Open Invoices?

If the amount of loan will be used to close the open invoices then you have to record the loan and track the payment. All you have to do is to select the account type, create a new account with valid information, and create a journal entry. Let us take through the whole procedure:

Choose the Account Type

For this, you can generate a new account. Pick the type of account to record the loan receivables:

  • Other Current Asset: You can use this type of account when the amount of loan will be paid by your customer during the current fiscal year.
  • Non-Current Asset: If your customer will pay the loan amount after the current fiscal year then you can begin with the non-current asset.

Create the New Account

To record the loan receivables, one has to create an account for the current asset. Follow these steps to know more:

  • Select the “Gear” icon to open the QuickBooks menu.
  • Then, click on the “Chart of Accounts” option.
  • Here, you can press the “New” button.
  • Now, choose the “Current Assets” option.
  • After this, select the “Detail Type” menu and choose the “Loans to Others” option.
  • Click the “Next” button.
  • Once done, add the name to your account. Make sure the name is descriptive.
  • Now, press the “Save and Close” button.

While entering these details, make sure you don’t add the opening balance for an account. Also, if the loan amount will be paid during the current financial year then you can make a non-current asset account.

Create a Journal Entry

Before applying the credit to the open invoices for your customer, you will have to create a journal entry. Please note that this journal entry will establish your opening balance as well as create the credits in Accounts Receivables. Let’s find out how to create a journal entry in QuickBooks:

  • Go to the “+New” button.
  • Then, select the “Journal Entry” option.
  • Move to the first line and do the following:
  • Add the name to your account. Make sure you use the same name you created earlier.
  • After this, go to the “Debit” field and add the loan amount.
  • Now, switch to the second line and perform the following steps:
  • Go to the “Credits” field and add the loan amount
  • In the “Name” field, you can add the name of your customer.

After performing these steps, you can continue applying to the open invoices for a specific customer. Now, you have learned how to record a loan receivable in QuickBooks Desktop and QuickBooks Online to close the open invoices for your customers.

Case 2: How to Record a Loan Receivable in QuickBooks Online for Other Purposes?

If you want to enter the loan receivable for other purposes or when you intend to write a check then you just need to choose the type of account, create a new account, prepare a check for the customer, and enter the customer repayments. This may also require you to create the product and service item list and recurring invoices. Also, when the payment is received, you can enter it into your account and add the deposit to adjust the interest. Since QuickBooks does not calculate the interest automatically, you have to do it manually. Let’s take you through the detailed steps:

Select the Account Type

First of all, you will have to select the type of account you want to proceed with. Both the accounts serve a different purpose. Only after selecting the account, you can generate a new account. Choose the type of account to record or track the loan and repayment:

  • Other Current Asset: When the amount of loan will be paid by your customer during the current fiscal year then you can use this type of account.
  • Non-Current Asset: This account can be chosen if your customer will pay the loan amount after the current fiscal year.

Create the New Account

To record the loan receivables, one has to create an account for the current asset. Follow these steps to know more:

  • Click on the “Gear” icon.
  • Select the “Chart of Accounts” option.
  • Here, you can click the “New” button.
  • Now, go to the “Current Assets” option.
  • Hit the “Next” button.
  • After this, select the “Detail Type” menu and choose the “Loans to Others” option.
  • Click the “Next” button.
  • Once done, add the name to your account. Make sure the name is descriptive.
  • Now, press the “Save and Close” button.

While entering these details, make sure you don’t add the opening balance for an account. Also, if the loan amount will be paid during the current financial year then you can make a non-current asset account.

Write the Check to Pay Customers

After you create the account, you are required to pay the customer. For this, you can prepare the check using the following instructions:

  • Select the “+New” menu.
  • Then, click on the “Cheque” option.
  • Choose the “Account” for the “Bank Account” you used to fund a loan. For example, Transaction Money Market.
  • Now, click on the account you used for tracking the loan as an off-setting account. This must be located below the cheque.
  • Press the “Save and Close” button.

Now that you have created the check, continue paying the customers. Thereafter, you are required to record the customer repayment.

Record the Customer Repayments

To record the customer repayments, one has to add the enter the relevant details regarding banks and loan amounts. Follow these instructions to understand better.

  • Click on the “+New” option.
  • Then, click on the “Bank Deposits” option.
  • After that, you have to be sure that the “Deposit To” field has the right account selected.
  • Now, moving to the “New Deposits” section and add the following details:
  • Received From: Here, you can add the name of the customer.
  • Account: Enter the account for the customer loan
  • Memo: For record-keeping, you can add a memo as well.
  • Ref No.: Here, type your cheque number.
  • Payment Method: You can select cash, cheque, etc.
  • Class: If you use the class tracking feature, you can select this.
  • Amount: Enter the amount of a cheque.
  • In case you are charging your customer any interest than do the following:
  • Go to the first line and add the principal amount only of the payment.
  • Select the second line and add the “Interest Income” account. Then, select the “Amount” section and type the portion of interest of a payment.
  • Once done adding the details, you can click the “Save” button.

As you save the details, the customer repayments will be recorded in QuickBooks accounting software. After that, you can prepare the product and service item list.

Create Product and Service Item

If you are planning to create the recurring invoices for the customer’s monthly payments, you will have to create the product service item that is using the loan receivable account of your customer.

  • Select the “Gear” icon.
  • Then, select the “Product and Service List”.
  • Press the “New” button.
  • After this, click on the “Non-Inventory” option.
  • Go to the “Name” field. For example, “Loan Payment Due”.
  • Here, choose the loan receivable account of your customer using the “Account” drop-down menu.

Now that you have added the list of services and items, you can continue generating the recurring invoices in your account.

Create Recurring Invoices

By creating recurring invoices in QuickBooks, you can remind your customer to pay the amount in time. To set the recurring invoices, you can follow these steps:

  • Click on the “Gear” icon.
  • Then, select the “Recurring Transactions” option.
  • After this, click the “New” button located at the top right.
  • Choose the “Invoice” option.
  • Click the “OK” button.
  • Now, choose the name of your customer.
  • Click on the “Product/Service” drop-down menu to choose the “Loan Payment Due” service item.
  • Move to the “Amount” menu and add the amount of your due payment.
  • Press the “Edit Schedule” option.
  • Select the “Start date”, “Interval” and “End” if applicable.
  • Click the “OK” button.
  • Press the “Save Template” button.

Once you save the template, the recurring invoice will be sent to the customer at regular intervals. This will include the payment link in an invoice. Please note when you get the payment against the loan, you will have to record that too in your account.

Record Payments When Received

When the payment against the loan is received, you can enter it into your accounting software. For help, you can go through the following instructions:

  • Select the “+New” button.
  • Then, click on the “Receive Payment” option.
  • At this point, you can add the information related to the payment. In case you don’t find the “Receive Payment” option, select the “Show More” button at the top.
  • Now, from the “Deposit to” option, choose the “Undeposited funds” option.
  • Click the “Save” button.

As you record the received payments from the customer, you can calculate the interest that is due on your current payment. All you have to do is note the loan balance and multiple it by the percentage of the internet. After that, you can divide it by 12 for 1 month’s interest.

Add the Deposit and Adjust the Interest Received

When you receive the interest, you can add it to your account. To enter the deposit, you can perform the following steps:

  • Click the “+New” button.
  • Click on the “Bank Deposits” option.
  • Select the checkbox located next to the payment.
  • Move to the “Add New Deposits” menu.
  • Click on the “Account” drop-down menu to choose the loan payable account.
  • Add the interest amount as a negative amount.
  • Move on to the second line and choose the account for interest income. After that, you can add the amount as a positive amount.

This will adjust the balance of a loan from the invoice entry. In addition, it will add the amount of interest back into the account of the loan receivable and post the interest to income.

Calculate the Loan Interest

QuickBooks does not calculate the interest automatically. Hence, users should know how to calculate the interest manually. Check out these steps:

  • Go to the “Amount” field.
  • Add the calculation.
  • Press the “Tab” key. QuickBooks will now calculate the results. For example, if the amount is $100, the interest will be calculated as 8.5%.
  • After this, you can switch to the “Amount” field and add “100*.085/12”.
  • Then, use the “Tab” key again.

At this moment, you will be seeing an amount like $.71. This is how you can manually calculate the interest within QuickBooks accounting software.

Final Words!

QuickBooks lets you record the loan receivable with valid information. Whether you want to record the loan receivable for open invoices or other purposes, depending on your case, you can enter the loan receivable in your accounting software. Here, we have shown you how to record a loan receivable in QuickBooks Desktop and QuickBooks Online. The whole procedure includes a series of steps that should be followed carefully.

If you want to record credit card refunds or void check in QuickBooks, check out these guides for better understanding:

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