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Vuralriza1
Level 2

How to record a financed expense?

Hi,

 

I need to record my business insurance expense for that we used to finance option.

Let's say:

Insurance Expense £10,000

I Used finance for the expense and will pay £1100 as instalments for the next 10 months (in total 1000 for interest and the rest for principal)

Could you please explain step by step how to record the payment of the insurance expense and the instalments payments to finance company.

 

Thank you

Riza

 

Solved
Best answer a month ago

Accepted Solutions
emmamiller6
Moderator

How to record a financed expense?

Hello Community Users, We just wanted to add some clarification to this thread.

In the case of a financed expense you would need to record the finance first. So is that amount on finance a long/short term loan to the business? In which case you would need to set up a chart of account for the loan under the detail type liability-selecting the most relevant one to match with short or long term loans. You would enter the balance you received. 

 

Then you can use the recurring feature to set up a recurring expense for supplier A, assuming you had the finance directly added to your bank. You can then set up a separate recurring transaction to pay off the loan/finance.

 

We'd really suggest speaking with an accountant to help you as financed expenses can be tricky and they may want you to record this a different way.

View solution in original post

4 REPLIES 4
katherinejoyceO
QuickBooks Team

How to record a financed expense?

Hi there, @Vuralriza1

 

Thanks for visiting the Community. I appreciate you for sharing detailed information on your goal. 

 

Sure, let's create a bill to record the full amount of your payable to that finance company, then use the Pay bills to enter your installments. Here's how: 

 

  1. In the + New menu, select Bill.
  2. Choose your finance company in the Supplier drop-down menu. You can also click the + Add new to add supplier to the list. 
  3. From the Terms drop-down menu, choose your preferred bill's term. The terms show when the supplier expects payment.
  4. Enter the Bill date and specify the Due date for the bill. 
  • The bill date is when it's created, entered, or received.
  • The due date is when you must pay for the finance company.

     5.  Select an expense account under the Category drop-down list, then enter the full amount

          of  £11,000 in the Amount field.

     6. Enter all necessary information under the Category and Item details.

     7. Select Save and close.

 

Once done, you can now enter your partial payment by opening the bill you've created. Here's how: 

 

  1. Click the + New menu, then go to the Suppliers tab.
  2. Locate your supplier, then select Pay Bills in the Action column.
  3. In the Payment account, select the bank account you want the payment to be taken out from.
  4. Enter the payment date.
  5. Under the Outstanding Transactions section, enter the partial payment amount ( £1,100 ) in the Payment field. 
  6. Click Save and close

 

You can now keep track of your payable by running Accounts payable aging detail report. Learn about how to customise supplier reports according to your business needs. 

 

For future reference, read through this help article: What is the difference between bills, cheques, and expenses?. It helps you decide when to create bills and cheques or expense to record your payables and expenses. 

 

Feel free to message again if you have additional questions. We're always delighted to help you more. 

Vuralriza1
Level 2

How to record a financed expense?

Vuralriza1
Level 2

How to record a financed expense?

Hi 

Maybe I couldn't clarify the issue properly.

In your case, there will be only one supplier which is the finance company, but your suggestion won't let me record the insurance expense from supplier A and the finance from supplier B (where I should split the payments as principal end interest and record the interest as an expense) separately.

If I go with your suggestion I will just able to record the transaction with the finance company as an expense, and not able to record the expense from the insurance company separately.

Could you please double-check, isn't there a more proper way that I can record every expense as it happens in real life?

 

Thank you

Riza

emmamiller6
Moderator

How to record a financed expense?

Hello Community Users, We just wanted to add some clarification to this thread.

In the case of a financed expense you would need to record the finance first. So is that amount on finance a long/short term loan to the business? In which case you would need to set up a chart of account for the loan under the detail type liability-selecting the most relevant one to match with short or long term loans. You would enter the balance you received. 

 

Then you can use the recurring feature to set up a recurring expense for supplier A, assuming you had the finance directly added to your bank. You can then set up a separate recurring transaction to pay off the loan/finance.

 

We'd really suggest speaking with an accountant to help you as financed expenses can be tricky and they may want you to record this a different way.

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