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How to Record a Loan in QuickBooks Online

· 4 min read
Debits

Introduction​

Properly recording a loan in QuickBooks Online is essential for accurate financial tracking and reporting. Whether your business takes out a loan for equipment, working capital, or other needs, correctly setting it up in QuickBooks will ensure that you can easily track loan payments, interest expenses, and the remaining balance. This guide walks you through the step-by-step process of recording a loan in QuickBooks Online.

Step 1: Set Up a Liability Account for the Loan​

1.1: Create a New Liability Account​

  1. Log in to QuickBooks Online: Start by logging into your QuickBooks Online account.
  2. Navigate to Chart of Accounts: Go to Accounting > Chart of Accounts.
  3. Create a New Account: Click on New in the top right corner.
  4. Select Account Type: In the "Account Type" drop-down menu, select Liabilities and Credit Cards.
  5. Choose Detail Type: Select Loan payable from the "Detail Type" options.
  6. Name the Account: Enter a name for the account, such as "Bank Loan" or the specific name of the loan.
  7. Save the Account: Click Save and Close to add the new liability account to your Chart of Accounts.

Step 2: Record the Loan Proceeds​

2.1: Record the Loan Deposit​

  1. Go to the Banking Menu: Click on + New and select Bank Deposit under the "Other" section.
  2. Choose the Bank Account: From the "Account" drop-down, select the bank account where the loan funds were deposited.
  3. Enter the Date: Specify the date when the loan funds were deposited into your account.
  4. Add a Deposit Line: In the "Add funds to this deposit" section:
    • Received From: Enter the name of the lender.
    • Account: Select the loan payable account you created earlier.
    • Amount: Enter the total loan amount.
    • Memo: Optionally, add a memo for reference.
  5. Save the Deposit: Click Save and close to record the loan deposit.

Step 3: Record Loan Payments​

3.1: Set Up a Loan Payment Schedule​

  1. Determine the Payment Details: Gather the loan payment schedule, including the amount, interest rate, payment frequency, and loan term.
  2. Go to the + New Menu: Click on + New, then select Check or Expense under the "Vendors" section, depending on how you make the payment.

3.2: Record the Loan Payment​

  1. Select the Payment Account: Choose the bank account from which you make the loan payments.
  2. Enter the Payment Date: Specify the date of the payment.
  3. Enter Payment Details:
    • Payee: Enter the name of the lender.
    • Account: In the first line, select the loan payable account for the principal portion of the payment and enter the amount.
    • Interest Expense: On the next line, select Interest Expense and enter the interest portion of the payment.
  4. Split Payments: If the payment includes both principal and interest, ensure each portion is accurately recorded in the correct account.
  5. Save the Payment: Click Save and close to record the payment.

Step 4: Track the Loan Balance​

4.1: Review the Liability Account​

  1. Access Chart of Accounts: Go to Accounting > Chart of Accounts.
  2. Locate the Loan Account: Find the loan payable account you created.
  3. Check the Balance: The balance in this account should reflect the remaining loan principal.

4.2: Run a Loan Balance Report​

  1. Go to Reports: Navigate to the Reports section.
  2. Search for Balance Sheet: Generate a Balance Sheet report to view the loan balance under liabilities.
  3. Review Payment History: For a detailed history, you can run a Transaction Detail by Account report for the loan payable account.

Best Practices for Managing Loans in QuickBooks Online​

  • Regular Reconciliation: Reconcile your loan account regularly to ensure your QuickBooks records match the statements from your lender.
  • Accurate Interest Recording: Always separate the principal and interest amounts when recording loan payments to accurately reflect your expenses.
  • Document Attachments: Attach supporting documents, such as loan agreements and payment schedules, to your transactions for easy reference.
  • Automate Payments: Consider setting up recurring transactions for fixed loan payments to streamline the process.

Conclusion​

Recording a loan in QuickBooks Online is essential for maintaining accurate financial records and understanding your business’s liabilities. By following the steps outlined in this guide, you can set up, track, and manage your loans efficiently, ensuring that your loan balances and interest expenses are correctly reflected in your financial statements. Implementing best practices for loan management in QuickBooks Online will further enhance your financial tracking and reporting capabilities.