Using a loan to pay a bill

Hi emilee 🙋‍:female_sign:

Thanks for your post.

Have you already entered a bill to the vendor for this payment? 

The usual way we would record paying a bill with a loan would be to create the bill (+ New > Bill) and on this select the loan account under 'Category' on the category details line. 

You can then save the bill and hit 'Make payment' to record the bank account this was paid to. :money_with_wings:

Hi GeorgiaC,

Yes, the bill was already entered in QBO a while ago.  Category: taxes and licenses.

That actually does not work as you cannot select a current liability as payment.

Hello there, riversu221.

In QuickBooks Online, we have a direct way to enter loans and payments. With that said, the detailed steps are laid out in this article: Set Up a Loan in QuickBooks Online.

Though that's how we do it in QuickBooks Online, we still recommend reaching out to your accountant. They know what's the best option in recording the loan. They can also share other ways to do it if there are.

If you don't have an accountant, we can help you find one. You can use this link on how to do it: Find an Accountant or Bookkeeper Near You.

If you're referring to something different, specific details would be much appreciated. Have a great day!

There is a problem with the original question; more clarifications from the poster is needed.

It boils down to the accounting principle of double entry. One payment (Cr entry in bank) cannot be used for two debit entries of the same amount (Dr Accounts Payable to pay the bill, and Dr Loan a/c to decrease the loan).

What we know from the original poster is that the bill was for "taxes and licenses", presumably a category in the P&L expenses, but was it meant for the business expense or was it paid on behalf on the loan provider ?

If the bill was meant for the loan provider, the answer is to remove the bill, and post the payment directly to the loan account. If not, more questions arise...