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):
- Gear Icon – Chart of Accounts
- Left side bar – Accounting – Chart of Accounts
3. At the Chart of Accounts windows click on New.
4. At Category Type field click on right arrow. Select Long Term Liability from drop down list.
5. At Detail Type field click on right arrow. Select Long term borrowings from drop down list.
6. Enter Account Name (optional -added RB let’s me know whom loan was from).
7. Click Save and Close.
8. Next you need to create an expense account for interest. Interest is an expense.
9. Follow steps 2 – 7.
10. Make sure to check off Is sub account – select Bank Charges from drop down list.
Step 2: Depositing The Loan Amount (this example client paying loan back weekly)
1. Click Plus Sign icon – click Bank Deposit under Other.
2. Enter Deposit.
3. In the Account field, select the liability account you created for the loan.
4. Enter amount of loan.
5. Click on Save and Close.
Step 3: Entering Loan Payments
Weekly repayment amount is $2,020.67. Interest and principle amount changes weekly.
1. Use Cheque to enter loan repayments.
2. Click Plus Sign icon – click Cheque under Suppliers.
3. Account first line enter loan interest.
4. Account second line enter principle.