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Record a loan and its payment

To track a loan payable, you need to create a liability account. Use Other Current Liability if the loan will be paid within the current financial year. Use Long Term Liability (or non-current liabilities) if the loan will be paid after the current financial year.

Here are the steps for recording liabilities and the payments for it.

Step 1: Set up a business loan

  1. Select the Gear icon at the top.
  2. Under Your Company, choose Chart of Accounts.
  3. Select New.
  4. Set the Account Type to Other Current Liabilities or Long Term Liabilities depending on the type of your loan.
  5. Set the Detail Type to Loan Payable.
  6. Type in the name of the account, then select Save and close.

Step 2: Enter an opening balance for a loan

  1. Select the Plus icon (+) at the top.
  2. Under Other, choose Bank Deposit.
  3. From the drop-down, select the bank account where the loan funds will be deposited.
  4. Enter the date of the deposit.
  5. Under the Account column, enter the loan payable account you created and the amount.
  6. Select Save and close.

Step 3: Record a loan payment

  1. Select the Plus icon (+) at the top.
  2. Under Suppliers, choose Check/Cheque.
  3. Add a check number if you send an actual check. If you use direct withdrawal of EFT, type in Debit or EF in the Check/Cheque # field.
  4. Enter the following information in the Account details section.
    • First line: Liability account for the loan and the amount of payment
    • Second Line: Expense account for the interest and the amount
    • Succeeding lines: Any additional fees along with the appropriate accounts.
  5. Select Save and close.