How to Set Up a Loan in QuickBooks Desktop and Online?

How to Set Up a Loan in QuickBooks Desktop and Online?

When you receive the loan, it is suggested to record it in your QuickBooks account along with loan payments. However, users will have to create a liability account because cash and non-cash loans such as office equipment and vehicles are liabilities for a company. By creating a liability account, you can keep track of what you owe. If you are willing to know how to set up a loan in QuickBooks, we will help you to be enlightened.

In this discussion, we will explain a series of steps for setting up a loan in QuickBooks Desktop as well as in QuickBooks Online. Read the guide carefully and know the important details to set up a loan in your QuickBooks account.

How to Set Up a Business Loan in QuickBooks Desktop?

Cash and non-cash loans such as office equipment and vehicles are liabilities for a company. QuickBooks helps you to record the payments and track the loan amount so you can stay updated. Hence, creating a liability account is important if you are planning to set up the loan in QuickBooks Desktop. Besides that, users should create a Supplier and Expense account.

After this, you can start recording the loan amount for cash or non-cash loan and enter the loan payments. For your better understanding, we will explain each method with detailed instructions. Read carefully and learn how to set up a loan in QuickBooks.

Step 1: Set Up the Liability Account

For setting up a loan in QuickBooks Desktop, one has to start with creating a liability account. To set up the liability account, you can perform the following steps in QuickBooks Desktop:

  • Click on the “Lists” menu.
  • Then, switch to the “Chart of Accounts” option.
  • Here, you can click right anywhere on the screen and select the “New” button.
  • Now, choose the “Other Account Types” option and click on the correct type of account for your loan. You will find the following options for account types:
  • Other Current Liability: You can use this account type when you are planning for a short-term loan payable only within over one year.
  • Long Term Liability: When you want to set up a loan for the long term over a long long period, this account type can be selected.
  • After this, you can press the “Continue” button.
  • At this point, you can add the number and name to your account.
  • Press the “Save and Close” option.

Step 2: Set Up the New Supplier

Once you are done creating the liability account, you can continue setting up the supplier. By creating a new supplier for the company and bank, you can pay for your loans. Follow these steps to set up the new supplier in QuickBooks Desktop:

  • Click on the “Suppliers” menu.
  • Then, choose the “Supplier Centre” option.
  • Click the “New Supplier” option.
  • After that, you can add the name of a company or the bank you want to pay for a loan.
  • Thereafter, you can add other details for the supplier such as email address and phone number. (This step is optional and hence, can be skipped).
  • Press the “OK” button to complete the supplier setup.

Step 3: Create the Expense Account

Expense accounts can also be created so you can track fees, interest payments, and other charges. To set up the expense account in QuickBooks Desktop, you can perform the following steps:

  • Navigate to the “Lists” menu.
  • Now, select the “Chart of Accounts” option.
  • Then, click right anywhere on your screen and choose the “New” button.
  • Click on the “Expense” button.
  • Hit the “Continue” option.
  • Once done, add the account name for your interest payment or charges and fees.
  • Click the “Save and Close” button.

Step 4: Record Your Loan Amount

When you are successfully done setting up the liability account for your loan, you can now start recording the loan amount. This can be done in two different ways; Cash Loans and Non-Cash Loans. In the following discussion, you will learn how to set up a loan in QuickBooks for cash as well as non-cash loans.

For Cash Loans

To record the loan amount for cash loans, you are required to create the deposit. All you have to do is click on the Make Deposit page and save the necessary details such as account, date, and amount. Here is the step by step details:

  • Click on the “Banking” menu.
  • After this, choose the “Make Deposits” option.
  • Here, you might see the “Payments to Deposits” window. You can click the “Cancel” button if it opens.
  • Now, when you are in the “Make Deposit” window, fill in the following details:
  • Go to the “Deposit To” field, you can choose the account into which you want to deposit the loan.
  • Then, you can check the “Date” field.
  • Enter “Memo” if required.
  • Move to the “From Account” section and choose the “Liability” account you set up earlier (in Step 1).
  • Click on the “Amount” section and type the loan amount.
  • Click the “Save and Close” option.

For Non-Cash Loans

For recording the loan amount for non-cash loans, you have to generate an asset account and journal entry with accurate details. Let’s find out what all information you will have to fill in while creating the asset account and journal entry.

Set Up the Asset Account

  • Click on the “Lists” menu.
  • Choose the “Chart of Accounts” option.
  • Click right anywhere on the screen and select the “New” button.
  • After this, you can click on the account type for the non-cash loan. The following are the types of accounts you can choose from:
  • Fixed Asset: You can select this type of account for items that have value for at least more than one year such as buildings, vehicles, and more.
  • Other Current Asset: Make this account your choice when the items have a value that can easily be converted to cash, for example, prepaid expenses.
  • Other Asset: This account type can be chosen for items that are Other Current Assets and Fixed Asset neither.
  • Once the account type is selected, you can press the “Continue” button.
  • Now, you can enter the number and name of your account.
  • Hit the “Save and Close” button.

Enter the Journal Entry

  • Click on the “Company” menu.
  • Press the “Make General Journal Entries” option.
  • Click on the “Date” and “Entry No.” of the journal.
  • In the first line, you can debit your loan asset account.
  • In the second line, you can credit the liability.
  • Press the “Save and Close” button.

This way you can record the loan amount for cash loans and non-cash loans in QuickBooks Desktop. While entering all the details, make sure you add the correct information.

Step 5: Record the Loan Payments

After recording the loan amount, you can record the loan payments. However, before proceeding further, there are a couple of reminders you should be aware of:

For a principal amount, QuickBooks will record the payment as a deduction to your liability account. When you are done finishing all your payments, the value will turn to zero in your liability account.
QuickBooks also records the interest payment as the company expense.

Once you keep all the necessary details in your mind, continue to record the loan payments in QuickBooks Desktop:

  • Navigate to the “Banking” menu.
  • Then, click on the “Write Checks” option.
  • After this, you can choose the “Bank Account”. Make sure you select the bank account you wish to use to pay a loan.
  • Here, you can verify the “Date” and “Check No.” options.
  • Thereafter, you can go to the “Pay to the Order of” field and choose the bank name.
  • Switch to the “Expenses” tab and fill in the following details in both the lines:
  • In the first line, you can choose the liability account you created before (in Step 1). Then, add the payment for your principal amount.
  • Move to the second line where you can choose the interest expense account. After that, you can add the payment for loan interest.
  • If you want a QuickBooks account to enter the payment automatically at regular intervals then you can memorize the check. To do so, you can perform the following steps:
  • Click on the “Memorize” button.
  • Enter the details as preferred.
  • Press the “OK” button.
  • Once done, you can click on the “Save and Close” button.

Now you have learned how to set up a loan account in QuickBooks Desktop for Windows computers. The aforementioned details will help you to enter the correct information for your bank details.

How Do I Set Up a Loan in QuickBooks Online?

If you have recently got the loan, you can record it and its payment in QuickBooks Online. All you have to do is create the liability account and then the account will track what you owe. After this, you can record the amount you got from the loan and also add the loan repayment in QuickBooks Online when you pay back your loans. Read further information to know how to set up a loan in QuickBooks Online.

Step 1: Create a Liability Account

By setting up the liability account, you can record the loan. This account will also help you to track what you owe. To create a liability account, you can pursue the following steps:

  • Click on the “Settings” menu by clicking on the “Gear” icon.
  • Then, choose the “Chart of Accounts” menu.
  • After this, choose the “New” button.
  • Click on the “Account Type” drop-down arrow to choose the “Non-Current Liabilities” option. Please note, if you are planning to pay the loan by the end of a currency financial year then you should select the “Current Liabilities” option.
  • Select the “Loan Payable” or “Notes Payable” option from the “Detail Type” section.
  • Here, you can enter a name for your account, for example, “Loan for a Car”.
  • Then, you can select when you wish to track the finances.
  • Move to the “Balance” field and add the amount in an account and fill the “As of” date. If you want to get started with tracking immediately then you can enter today’s date.
  • Once done entering all the details, press the “Save and Close” button.

Step 2: Record the Amount You Received from a Loan

Now that you have created the liability account, you can record the amount that you have received from a loan. Remember each time you make a payment towards a loan, this can be recorded against the account. Depending on how you want to handle the loan amount, you can record the loan amount. In the following discussion, we will show you how to put all the amount into your bank.

  • Click on the “+New” button.
  • Then, choose the “Journal Entry” option.
  • Move to the first line and click on the “Account” drop-down arrow to select the liability account you created earlier.
  • Thereafter, you can click on the “Credits” field and add the loan amount.
  • Switch to the second line and click on the “Account” drop-down arrow to choose the bank account.
  • After this, you can click on the “Debits” field and add the same loan amount you specified in the above steps.

As you enter the loan amount, this will be put into the bank account. Now, whenever you record purchases or expenses, you can choose this bank account as your payment account.

Step 3: Record the Loan Repayment

When it is time to pay back your loan, you can record each repayment in QuickBooks Online. This can be done through the following steps:

  • Click the “+New” button.
  • Then, select the “Cheque” option.
  • At this point, you can enter the check number if you want to send the actual check. If you want to use the ETF or withdrawal then make sure you enter the “ETF” and “Debit” fields in the “Check” field.
  • After that, you can add the required details in the “Category Details of a check:
  • Move to the first line and click on the “Category” drop-down option to choose the liability account for your loan. After this, you can add the payment amount.
  • Go to the second line and click on the “Category” drop-down menu to choose the expense account for interest. Then, add the amount of interest.
  • In the remaining lines, you can enter the additional fees, if any. Also, you can choose the relevant account using the “Category” drop-down arrow.
  • After you enter the required details, click the “Save and Close” button.

This is how you can set up the loan in QuickBooks Online. Besides setting up a loan in QuickBooks Online, you can keep track of loans and get reminders of upcoming payments, you can use the QuickBooks Loan Manager. This will help you to track as well as manage the loan with your QuickBooks account.

Endnote

To keep track of what you owe, users should record every detail for the loan they receive. All you have to do is create the liability account, record the loan amount, and enter the loan payments. For better understanding, we have already shared how to set up a loan in QuickBooks Desktop and QuickBooks Online.

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