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, set up a liability account to record the loan:
- Select Settings ⚙, then select Chart of Accounts.
- Select New to create a new account.
- From the Account Type ▼ dropdown menu, 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.
- From the Detail Type ▼ dropdown, select Notes Payable (or Loan Payable).
- Give the account a relevant name, like "Loan for a car" or "Covid-19 relief loan."
- 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.
- Select Save and close.
Step 2: Record the money you got from the loan
Now you have an account to track what you owe for the loan.
If you plan to put your loan money directly into your bank account
Follow these steps to record the money with create a journal entry:
- Select + New.
- Select Journal entry.
- On the first line, select the liability account you just created from the Account dropdown. Enter the loan amount in the Credits column.
- 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 in a different way
If you decide to use the money right away and not put it in a bank account, like making a direct purchase, 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.
- Select + New.
- Select Cheque.
- 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:
- On the first line, select the liability account for the loan from the Category dropdown. Then enter the payment amount.
- On the second line, select the expense account for the interest from the Category dropdown. Then enter the interest amount.
- On additional lines, add any additional fees. Select the appropriate accounts from the Category dropdown.
- When you're done, select Save and close.