Non-cash asset loans including office equipment and vehicles are a liability for the company. If you have received a loan then you can record it in your QuickBooks account. QuickBooks allows its users to track the amount of the loan and record the payment. This way you can track what you owe. To learn how to record a loan payment in QuickBooks Desktop and Online, stick through our guide. Here, we will enlighten you with each of its details.
- How to Record a Loan Payment in QuickBooks Desktop?
- Step 1: Make a Liability Account
- Step 2: Set up the Vendor
- Step 3: Create an Expense Account
- Step 4: Record Your Loan Amount
- Step 5: Record Your Loan Payments
- How Do I Record a Loan Payment in QuickBooks Online?
How to Record a Loan Payment in QuickBooks Desktop?
QuickBooks Desktop users can also record the loan payment. Whether it is a non-cash asset or cash loan, QuickBooks allows tracking your loan amount as well as record the payments.
The procedure of recording the loan payment requires you to follow a number of steps. First of all, you will have to create a liability account. Thereafter, you need to set up your vendor and create the expense account to record your loan amount. A loan could be cash or non-cash.
To record a loan payment in QuickBooks Desktop, one can go through the following steps:
Step 1: Make a Liability Account
In order to record loan payments, creating a liability account is required. All you have to do is go to the Lists, click on the Chart of Account, click right on the New button, choose the Other Account Types, and save the details.
For step by step guide, you can continue following these:
- In “QuickBooks Desktop”, click on the “Lists” option.
- Then, click on the “Chart of Accounts” option.
- At this point, click right on the “New” button.
- Here, you need to choose the “Other Account Types” option.
- Then, choose the right type for the loan. It could be any of the following:
- Long Term Liability: You can select this type of account only when you want to use this for long-term loans that are payable over a longer period.
- Other Current Liability: This option can be chosen for short-term loans that are payable over a year.
- Click the “Continue” button.
- Add the name and account number.
- Click the “Save & Close” button.
Step 2: Set up the Vendor
The next step is to create a vendor for the company or bank you wish to pay for your loan. To set up a new vendor, go to the Vendors menu and enter the details. Here are the steps in detail.
- Navigate through the “Vendors” menu.
- Then, click on the “Vendor Center”.
- Click the “New Vendor” option.
- Now, add the bank name or company whom you want to pay for a loan.
- At this point, you can enter additional details related to vendors. It could be an email address and phone number. Although this is optional.
- Click the “OK” button.
Step 3: Create an Expense Account
Creating an expense account is important if you want to track interest charges and fees or payments. For this, you will have to go to the Lists, click on the Chart of Accounts, and click right to select the New button. After that, choose Expense to create an account and enter the account name.
- Click on the “Lists” option.
- Then, click the “Chart of Accounts” option.
- After this, click right on the “Expense” option.
- Hit the “Continue” button.
- At this stage, enter the name of the account and the required information such as charges and fees, or payments.
- Click the “Save & Close” button.
Step 4: Record Your Loan Amount
Loans that you want to pay could be cash or non-cash loans. To record the loan amount, you can do the following:
For Cash Loans
- Click on the “Banking” option.
- Then, click on the “Make Deposits” option.
- Choose the “Cancel” button if you see the “Payments to Deposit” window.
- When you see the “Make Deposits” screen, enter the following details:
- In the field of “Deposit To”, choose the account into which you want to deposit your loan.
- Now, review the “Date” and add the optional “Memo”.
- In the column “From Account”, choose the “Liability” account that you created earlier.
- Now, when you move to the “Amount” column, add the amount of your loan.
- Hit the “Save & Close” button.
For Non-cash Loans
- First, you have to create an “Asset” account. For that, click on the “Lists” option.
- Click on the “Chart of Accounts” option.
- Then, click right anywhere on the screen and choose the “New” button.
- After that, choose your account type for the non-cash loan from the following:
- Fixed Asset: You can choose this as your account type when your items (such as buildings, vehicles, etc) have value for over a year.
- Other Current Asset: This option can be used for the items with a value that you can convert to cash, e.g., prepaid expenses.
- Other Asset: Choose this option for the items that are neither Other Current Assets nor Fixed Assets.
- Click on the “Continue” option.
- Add the account name and account number.
- Click on the “Save & Close” option.
- After that, you are required to enter the “Journal Entry”. To do so, click on the “Company” menu.
- Click on the “Make General Journal Entries”.
- Add the “Date” and the “Entry No.” of the journal.
- Now, choose the first line and then debit your loan asset account.
- After this, click on the second line and then credit your liability account.
- Later, you can press the “Save & Close” button.
Step 5: Record Your Loan Payments
Before recording the loan payments, one has to keep a few things into consideration. These are as follows:
- QuickBooks will record your interest payment as a company expense.
- Also, QuickBooks helps you to record the payment as a deduction for a principal amount to a liability account. When you are done completing all your payments, the liability account value will become zero.
Now, you can continue following the steps for recording the loan payments in QuickBooks Desktop.
- Click on the “Banking” menu.
- Go to the “Write Checks” option.
- Now, select your “Bank Account” that you wish to use for paying the loan.
- Here, you can verify the “Date” and “Check No.”.
- From the “Pay to the Order of” section, you can choose your bank name.
- After that, enter the following details in the “Expenses” field:
- In the first line, you can choose the liability account that you created in Step 1. Thereafter, you can add the payment for your principal amount.
- After that, go to the second line, choose the interest expense account and add the payment for your loan interest.
- Once done, you can memorize your check if you want QuickBooks to mention the payment automatically at regular intervals. Although this is optional. But, if you want to do that:
- Click on the “Memorize” option.
- Mention the required details.
- Press the “OK” button.
- Then, click the “Save & Close” button.
This is how you can record the loan payment on QuickBooks Desktop. Make sure you create a liability account first. Thereafter, you can create the vendor and expense account to record the cash or non-cash loan amount. Loan payments can also be recorded in QuickBooks Desktop.
How Do I Record a Loan Payment in QuickBooks Online?
To record a loan payment in QuickBooks Online, setting up a liability account is necessary. As you set up the liability account, you can record what is owed. Thereafter, you can record the amount you have got from a loan and after that, you can record your loan payment in your QuickBooks account.
To follow the procedure of recording a loan payment in QuickBooks Online, check out the following instructions:
Step 1: Create a Liability Account
The first set is to create a new liability account. All you have to do is go to the Chart of Accounts, click the New button, select the Account Type, and Detail Type to set up the liability account.
- Navigate through the “Settings”.
- Click on the “Chart of Accounts” option.
- From here, select the “New” button in order to make a new account.
- Choose the “Non-Current Liabilities” option using the “Account Type” drop-down menu.
Note: Those who are planning to pay the load by the current financial year end can choose the Current Liabilities option from the Account Type dropdown menu.
- Now, select the “Loan Payable” or “Notes Payable” option using the “Detail Type” dropdown menu.
- Add a relevant name to your account.
- At this point, you will have to decide when you would prefer to start tracking the finances. Then, add the amount in the “Balance” field.
- Also, add the “as of” date. If you immediately wish to start tracking then make sure you add today’s date.
- Then, press the “Save and close” button.
After you save the details, your liability account will be set up. After that, you can continue recording the money you owe.
Step 2: Record Your Money
Now that you have the account with the loan amount so you can easily record the loan against the account whenever you want to make the payment for the loan. However, you have to decide how you want to handle the money of the actual loan.
If you are planning to put your loan into the bank account directly then you should pay attention to the following instructions:
- Click the “+New” button.
- Choose the “Journal entry” option.
- Then, you can enter the following details in each line:
- In the first line, you need to choose the liability account that you have created using the “Account” drop-down. Then, in the “Credits” column, you can add the loan amount.
- In the second line, you can select your bank account using the “Account” drop-down menu. Then, in the “Debits” column, add the same amount of loan.
Doing so, the whole amount of the loan will be added to your bank account. Now whenever you plan to record the purchases or expenses, you just need to choose your bank account as a payment amount.
Step 3: Record the Loan Payment
Once you are prepared to pay back your loan, you can continue following these steps to record each repayment.
- Select the “+New” option.
- Click on the “Cheque” option.
Note: In case you are in the Business view then you should switch your account in the Accountant view then follow these steps.
- If you are planning to send the actual cheque then you should add the cheque number. But, if you use the ETF or the direct withdrawal then you should enter the “ETF” or “Debit” in the “Cheque” field.
- Then, in the “Category Details” section of your cheque, you need to enter the following details:
- In the first line, you have to select your liability account for a loan. You can select this account using the “Category” drop-down. Then, you can add the amount for payment.
- Then, switch to the second line, you can choose the expense account using the “Category” drop-down menu. Then, you can add the interest amount.
- For other lines, you can enter the additional fees (if any). Then, click on the relevant accounts. For this, you can use the “Category” drop-down.
Once you are done performing these steps, you can click the Save and Close button. Now you have learned how to record a loan payment in QuickBooks Online. To learn about the QuickBooks Desktop version, continue reading.
Recording a loan in QuickBooks is necessary so that you can track what you owe. This is quite easy to record the amount of the loan and the payment. All you have to do is make sure that setting up the liability account is required. Only after that, you will be able to record the loan amount and payment. Hope you have understood the procedure of how to record a loan payment in QuickBooks Online and Desktop.
If you want to learn How to Enter or Record Opening Bank Balance in QuickBooks, read this guide.