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Community Contributor *
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Line of Credit

Can anyone tell me what the ramifications to changing a line of credit account set up only in the COA as an "other liability"? It should have been set up as a "credit card" so that interest, payments, etc could be tracked, but unfortunately it was not.

Best answer 02-21-2019 11:47 AM

Accepted Solutions
QuickBooks Team

Re: Line of Credit

Thanks for getting back to us, @teverhart26.

 

I'd be glad to share a few insight about the ramifications when changing the account.

 

After changing the account, the balance from your line of credit will be transferred to your Credit Card account but it will still the same effect in your Chart of Accounts. Also, they will have different positioning in your Balance Sheet report.

 

Fill me in if you have further questions. I'll be around if you need any help.

8 Comments
QuickBooks Team

Re: Line of Credit

Hi @teverhart26,

 

Allow me to provide you with some information about your line of credit account and help you edit it.

 

Setting up a line of credit account in QuickBooks allows you to record interest and pay your bills. 

 

When you set up your line of credit as “other liabilities” you won’t be able to pay your liabilities or payables.

 

On the bright side, you can still edit the set up of your account. Let me show you how:

  1. On the left panel, hover your mouse on Accounting, and choose Chart of Accounts.
  2. Select the Line of Credit account.
  3. Under the View Register drop-down, choose Edit.
  4. Choose Credit Card under the Account Type drop-down.
  5. Click on Save and Close.

Feel free to read this article for more information: How to Track a Line of Credit?

 

Fill me in if you have any other questions. I’ll be here to help you. Have a good day!

Community Contributor *

Re: Line of Credit

Hi, thanks! Yes, I know I can edit the COA account. 

 

Do you know what ramifications there are in changing the account now?  It has been set up for a while.  I know I will probably have to go back at least a year to enter the interest/finance charges associated to get an accurate picture of the account.

 

Any insight would be greatly appreciated!

Thanks!

QuickBooks Team

Re: Line of Credit

Thanks for getting back to us, @teverhart26.

 

I'd be glad to share a few insight about the ramifications when changing the account.

 

After changing the account, the balance from your line of credit will be transferred to your Credit Card account but it will still the same effect in your Chart of Accounts. Also, they will have different positioning in your Balance Sheet report.

 

Fill me in if you have further questions. I'll be around if you need any help.

Established Community Backer ***

Re: Line of Credit

Here are the differences:

 

LOC is a Liability. If you Draw from it and deposit the proceeds into Banking, then it is Liability. The Activity is going in and out of Banking and when you pay interest and principal, the details are on the Check you enter to show they took funds from checking to pay against your LOC balance.

 

LOC as Credit Card, a different type of Liability, is used when Your regular banking is not the Spending entity. Example: I get a construction LOC and everything I submit to the Bank is paid by the Bank, drawing on the LOC directly. Or, I pay using the LOC directly. In both of these examples, using CC functions is helpful, but still not Required. I also can Enter bills to vendors, then show the vendor balance is offset to the LOC as Other Current Liability.

FMW
Senior Explorer **

Re: Line of Credit

From what you’ve described I need to set up my LOC as a credit Card (construction loan). I submit request to bank and bank pays.  For the 1st 6 months the bank is withdrawing only my interest from checking account . Do I enter this in my interest expense account?  

 

QuickBooks Team

Re: Line of Credit

You got it right, @FMW.

 

Let's record your interest transactions under Interest Expense Account.

 

Here's how:

  1. Go to the Banking Page.
  2. Choose the Banking tab.
  3. Look for the interest transaction in the For Review tab.
  4. Expand the transaction.
  5. In the Category section, look for Interest Expense Account.
  6. Click Add.

Don't hesitate to leave a post below if you have other questions categorizing your income and expense transactions. I'm always here to help.

FMW
Senior Explorer **

Re: Line of Credit

Thank you for reply. I use qb desktop so I’m not sure about the expense categories directions you provided. 

Highlighted
QuickBooks Team

Re: Line of Credit

Hi there, FMW.

 

The steps given by my colleague are for QuickBooks Online since that's the product attached to this thread.  Also, we recommend checking with your accountant as to which account it'll be posted to.

 

Visit us again in the Community if you have other questions.