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KMills1
Level 1

How do I handle business operating loans

My company has recently taken out a couple of loans to cover operating expenses -- entirely unrelated to CARES or PPP. I need to set up these loans in QuickBooks so I can accurately track the money we received and the payments towards each loan. Would these be Current Liability accounts? We're on a cash accounting basis, so do I need to track the interest and principal portions of each payment separately, or can I just enter the payments?

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Best answer September 10, 2021

Best Answers
Candice C
QuickBooks Team

How do I handle business operating loans

Hey there again, @KMills1

 

Thanks for reaching back out and telling us a little bit about the business and what you do. Allow me to share some information about liabilities that will help. 

 

Current Liabilities:

 

Current liabilities are the obligations of a business due within one operating cycle or a year(whichever is greater). Here, operating cycle means the time it takes to buy or produce inventory, sell the finished products and collect cash for the same. 

 

Here's a article that provides more information: What are Current Liabilities? – Definition and Example

 

Long Term Liabilities:

 

The Long Term Liability account is not automatically set up in QBO. You'll need to manually create in the Chart of Accounts to track loaned amount depending on how long you'll pay them. You can use the Long-term debt type to track loans and obligations with a maturity of longer than one year. You can also use the Notes payable type to track the amounts your business owes in long-term (over twelve months) loans. 

 

Hopefully, this will answer your question fully. If you have any additional concerns, feel free to ask. Have a splendid Friday and weekend ahead!

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4 Comments 4
Charies_M
Moderator

How do I handle business operating loans

Welcome to the Community, KMills1.

 

To guide you in choosing the correct accounts to use when recording business operating loans, you'll want to consult your accountant. Also, Intuit offers a Find-a-ProAdvisor service for business owners to connect with QuickBooks certified accountants and bookkeepers.

 

For the complete process on how to track loans in QBDT, check out this article: Manually track loans in QuickBooks Desktop.

 

You may also be interested in using the QuickBooks Loan Manager feature. This helps  calculate interest and payment schedules and handle different loan options: QuickBooks Loan Manager

 

Feel free to visit our QuickBooks Help Articles page for more insight s about managing your business in your software.

 

Don't hesitate to let me know if there's anything else you need help with while working with managing loans. Have a good one.

KMills1
Level 1

How do I handle business operating loans

I guess my real question is how QuickBooks treats the different liability types. I'm not a certified CPA, but I had three years of Accounting in college, as well as a number of years of experience with QuickBooks -- I've just never had to deal with this specific issue before.

 

To cut to the chase -- can you either tell me the differences between current vs long-term liabilities in QuickBooks, or at least give me a link to where I can find that information?

 

I created a Long-Term Liability group called Operating Expenses Loans, with each of the lenders as a subgroup, but I haven't entered any of the transactions yet because I'm waiting for a little more information on the differences in how QuickBooks treats the different types of liabilities.

 

I work for a small family-owned business that only started truly growing in the last few years, so the bookkeeping system isn't as robust as it could be -- I was hired last year as the Office Manager, with keeping the books as my primary focus of responsibility. My bosses had briefly mentioned the loans a couple of days ago in a face-to-face, but I don't have all the details just yet. All I have so far is what has come through the bank feeds.

 

I have looked into the Loan Manager feature, but with the state of our bookkeeping system, it wouldn't really make sense to try to incorporate it into our operations; plus, the only information I currently have about the loans is the lenders, how much the company received from each one, and the frequency and amount of the payments to date (I'll be getting more information soon). Really all I can do at this point is post the payments as they become due and try to keep track of the balance of each one as we pay them off.

 

FYI - the company has an outside CPA, but it usually takes at least 2-3 weeks to get a response from her, so I avoid having to reach out to her as much as I possibly can so I can get my work done in a timely manner.

 

So... can you please point me in the right direction to learn the details about how QuickBooks deals with the different liability types so I can make the determination of which is more suitable for our situation?

Candice C
QuickBooks Team

How do I handle business operating loans

Hey there again, @KMills1

 

Thanks for reaching back out and telling us a little bit about the business and what you do. Allow me to share some information about liabilities that will help. 

 

Current Liabilities:

 

Current liabilities are the obligations of a business due within one operating cycle or a year(whichever is greater). Here, operating cycle means the time it takes to buy or produce inventory, sell the finished products and collect cash for the same. 

 

Here's a article that provides more information: What are Current Liabilities? – Definition and Example

 

Long Term Liabilities:

 

The Long Term Liability account is not automatically set up in QBO. You'll need to manually create in the Chart of Accounts to track loaned amount depending on how long you'll pay them. You can use the Long-term debt type to track loans and obligations with a maturity of longer than one year. You can also use the Notes payable type to track the amounts your business owes in long-term (over twelve months) loans. 

 

Hopefully, this will answer your question fully. If you have any additional concerns, feel free to ask. Have a splendid Friday and weekend ahead!

View solution in original post

KMills1
Level 1

How do I handle business operating loans

Thank you, Candace! That actually helps a lot. As I said earlier, I don't know much about the loans, including how long the payoff period is, so knowing the different options available helps.

 

We're a construction company, so one year will be the more appropriate criteria for determining which option to go with.

 

Have a great weekend! 

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