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Set up a loan in QuickBooks Online

by Intuit Updated 2 days ago

Learn how to record a loan in QuickBooks Online.

Did you recently get a loan? In QuickBooks Online, you can set up a liability account to record the loan and its payments. This account tracks what you owe.

Here's how to set up your liability account to track the loan. We'll also show you one way to put that loan money into your bank account.

Step 1: Set up a liability account to record what you owe

First you need to create and set up a liability account so you can record the loan. Here’s how.

  1. Go to Settings ⚙ and select Chart of accounts.
  2. Select New to create a new account.
  3. From the Account Type ▼ dropdown, select Non-current liabilities.
    Note: If you plan to pay off the loan by the end of the current financial year, select Current liabilities instead.
  4. From the Detail Type ▼ dropdown, select Notes Payable (or Loan Payable).
  5. Give the account a relevant name, like "Loan for a car" or "Covid-19 relief loan."

Step 2: Determine the loan balance

A new loan will generally show the full balance to be paid back. If the money from the loan was deposited to your bank:

  1. Leave the Opening Balance at S $ 0 and select Save.
  2. Categorise the bank deposit in your liability account to establish the beginning balance.

A prior loan that is added to QuickBooks Online and was partially paid back should be set to the current payoff balance.

  1. In the Opening Balance section, pick the date you want to start tracking your finances from. 
  2. Enter the account balance for that date. 
  3. Select Save.

Note: The beginning balance will post to Opening Balance Equity. This will balance the transaction in the chart of accounts.

If you add a balance in the liability account during Step 2, and your bank feeds show the deposited loan amount, you will need to make a second journal entry when you record the deposit.
Note: The opening balance entry in the liability account created the first journal entry in the account's register.

Here’s how to create a journal entry:

  1. Select + New.
  2. Select Journal entry.
  3. Select the liability account from the Account field. To remove or reduce the opening balance, enter the opening balance amount in the Debits column.
  4. Select the Opening balance equity account. Enter the same amount from line 1 into the Credits column to balance the transaction in the chart of accounts.
    • Check the amounts. You should have the same amount in the Credits column on one line and the Debits column on the other. This means the accounts are balanced.
  5. Enter information in the memo section so you know why you made the journal entry.
  6. Select Save and close.

If you decide to use the money right away to make a purchase and not put it in a bank account, reach out to your accountant. This can get tricky and they know how to handle the next steps. Don't have an accountant? We can help you find one.

Note: To pay and amortise the debt of an intangible asset, see the Amortisation schedule in QuickBooks Online.

Step 3: Record a loan repayment

When you're ready to pay back the loan, follow these steps to record each repayment.

  1. Select + New.
  2. Select Cheque.
  3. Add a cheque number if you plan to send an actual cheque. If you use direct withdrawal or an EFT, enter Debit or EFT in the Cheque no. field.

Then enter the following in the Category details section of the cheque:

  1. On the first line, select the liability account for the loan from the Category dropdown. Then enter the payment amount.
  2. On the second line, select the expense account for the interest from the Category dropdown. Then enter the interest amount.
  3. On additional lines, add any additional fees. Select the appropriate accounts from the Category dropdown.
  4. When you're done, select Save and close.
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