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Set up a loan in QuickBooks Online

SOLVEDby QuickBooksQuickBooks Online245Updated 2 weeks 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. Select Settings ⚙, then 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."
  6. Choose when you want to start tracking your finances. In the Unpaid balance field, enter the amount in the account, and determine the as of date. Enter today's date if you want to start tracking immediately.
  7. Select Save and close.

Step 2: Record the money you got from the loan

Now you have an account with the full loan amount. Each time you want to make a payment towards the loan, you can record it against this account.

Follow the steps based on how you plan to handle the actual loan money:

Follow these steps if you put all the loan money right into the bank:

  1. Select + New.
  2. Select Journal entry.
  3. On the first line, select the liability account you just created from the Account dropdown. Enter the loan amount in the Credits column.
  4. On the second line, select the appropriate bank account from the Account dropdown. Enter the same loan amount in the Debits column.

This puts the entire loan amount into your bank account. Whenever you record expenses or purchases, you can select your bank account as the payment account.

If you plan to use your loan money in a different way

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. Or if you're in Business view, follow the steps to switch to Accountant view first. Then come back to these steps.
  3. Add a cheque number if you plan to send an actual cheque. If you use direct withdrawal or an ETF, enter Debit or ETF in the Cheque # 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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