Setting up simple-interest loan accounts

Stan Audette · ‎November 27, 2022

Can Quickbooks Online allow us to create individual loan accounts according to the following terms, and then populate them with historic data as we migrate those data into the new accounts?

For the past 55 years, my father's business has been making simple interest loans to individuals who buy real estate from him. Since the early 90's, we've been tracking these loans through various spreadsheet programs. Since about 2004, we've used MS-EXCEL-2003 spreadsheet templates that we've recently migrated into Google Sheets. However, my wife believes that these accounts could be managed better through Quickbooks Online to reduce work and help eliminate mistakes. Most of the business is now being tracked in Quickbooks Online; however, we're still managing the loan accounts in Google Sheets.

Our loans record starting balances and dates. Interest is accrued daily at the rate of 10% per year on the remaining principal balances at the time of any transaction, e.g., payments, property tax bills, additions to the loans for property improvements such as wells, septic systems, etc. We set scheduled monthly payments of 1% of each starting balance. We post charges for late payments. There are no pre-payment penalties. If improvements are made to the property, then the scheduled payments are increased by 1% of the costs of those improvements. (This particular scheme of interest and payment amounts amortizes out to roughly 17.9 years if all payments are made on time.)

If this can be done, where do we go to learn how to set everything up?

DivinaMercy_N · ‎November 27, 2022

It's nice to see you here in the Community, @Stan Audette. I'm here to provide info on how you can record a simple loan interest account in QuickBooks Online (QBO).

Thanks for trusting QBO as your accounting partner. I also appreciate you providing detailed information about your loan concern. To help you with this, you'll need to create an Asset account for the loan first. Here's how:

Navigate to the Settings menu and select Chart of accounts (ensure that you're in the Accountant view).
Next, select New and click Assets.
Then, in the Save account under and Tax form section field, choose Loans to Others.
On the Account name field, enter the name of the loan account.
Once done, select Save without entering an opening balance.

After that, you'll need to create a check for the loan. Ensure to select the account you used to fund the loan in the Bank Account section and choose the asset account you've recently created in the Category field.

Then, use the Bank deposit feature to record the loan payments. You'll have to manually calculate the interest and add it to the second line of the transaction. Make sure to assign it to the account you use to track interest income and enter the correct amount.

For reference, feel free to check this article: Track customer loans in QuickBooks Online. This also includes steps in creating a recurring invoice transaction for monthly loan payments.

I also recommend reaching out to your accountant to have additional guidance in creating simple interest loan accounts in QBO. This is to ensure you'll record everything correctly and to avoid messing up your books.

You can also run a report to track loan transactions you record in QBO. To do so, simply go to the Reports menu and search for Transaction Detail by Account.

Please let me know how this goes and leave a reply below if you have additional questions about recording loans in QBO. I'm just around the corner to help. Have a good one and keep safe.

Rainflurry · ‎November 28, 2022

@Stan Audette

QB Online (and QB Desktop) does not have that functionality. You will need to continue tracking it outside of QB.

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