My employer got a business loan. How do I enter the loan showing the principle and interest payments in QuickBooks?
You will create a liability account to track the balance on the loan. If the loan is less then year select Other Current Liability. Select Long Term Liability if the loan will be repaid back longer than a year.
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Step 1: Setting Up Accounts in Chart of Accounts
1. Setup a liability account. (This example setting up long term liability for $150,000 loan).
2. Open Chart of Accounts (select from either method):
- Accountant (menu bar) – Chart of Accounts
- Home Page – click Chart of Accounts Icon
3. At the Chart of Accounts window right click.
4. From drop down menu click on New.
5. At Add New Account window – click in Other Account Types – select Long Term Liability.
6. Click Continue.
7. Enter Account Name (optional -added RB let’s me know whom loan was from) (add account number if active).
8. Click on Save & Close.
9. Next you need to create an expense account for interest. Interest is an expense.
10. Follow steps 2 – 4.
Step 2: Depositing The Loan Amount (this example client paying loan back weekly)
1. Deposit loan amount – (select from either method):
- Banking (menu bar) – Make Deposit
- Home Page – click Record Deposits Icon
- Deposit Icon from Icon Bar
2. Enter Deposit.
3. Select bank account to deposit loan to.
4. In the From Account field, select the liability account you created for the loan.
3. Click on Save & Close.
Step 3: Entering Loan Payments
Weekly repayment amount is $2,020.67. Interest and principle amount changes weekly.
1. Use Write Cheque to enter loan repayments.
2. Account first line enter loan interest.
3. Account second line enter principle.