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Level 3

How do I record an expense to a liability account

Quickbooks only allows bank and credit card accounts to record expenses. But I have a liability account that charges interest. I need to add this expense to the loan amount. How do I do this?

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Best answer 07-01-2019

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Level 3

Re: How do I record an expense to a liability account

So this is the way I figured out how to do it. It surely is a workaround though.

You start with a "fake" bank account. I call it not for deposit. It should always have a zero balance.

So you make a deposit in the not for deposit bank, using your liability account as the source of the funds. This makes you owe them more money. In my case, I owe them interest. Then you expense the not for deposit account for whatever you want to in the same amount of the deposit. In my case, it was for the interest. Let me know if this helps you.

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4 Comments
Level 3

Re: How do I record an expense to a liability account

So this is the way I figured out how to do it. It surely is a workaround though.

You start with a "fake" bank account. I call it not for deposit. It should always have a zero balance.

So you make a deposit in the not for deposit bank, using your liability account as the source of the funds. This makes you owe them more money. In my case, I owe them interest. Then you expense the not for deposit account for whatever you want to in the same amount of the deposit. In my case, it was for the interest. Let me know if this helps you.

View solution in original post

QuickBooks Team

Re: How do I record an expense to a liability account

Hi @Nathandh,

 

Thank you for sharing this idea to the Community, we appreciate it. I'm dropping by to share the steps to record an expense to a liability account.

 

We'll have to set up the loan first. Here's how:

  1. Move to the Accounting tab, then click the New button.
  2. Set the Account Type to Other Current Liabilities (if you'll pay the loan within the current fiscal year) or Long Term Liabilities (if you'll pay the loan after the current fiscal year).
  3. Set the Detail Type to Loan Payable.
  4. Enter the name of the account, then click Save and close.

Then we'll need to record an opening balance for the loan. Follow these steps:

  1. Click the Plus (+) icon, then select Bank Deposit.
  2. Select the bank account where the loan funds will be deposited.
  3. Type in the date of this deposit.
  4. Enter the loan payable account with the amount under the Account column.

Finally, here's how you can record a loan payment:

  1. Click the Plus (+) icon, then select Check.
  2. If you send an actual check, add a check number.
  3. In the Category Details section, enter the following information.
    • First line: Liability account for the loan and the amount of payment.
    • Second line: Expense account for the interest and the amount.
    • Succeeding lines: Any additional fees along with the appropriate accounts.
  4. Select Save and close.

I'd also suggest consulting your accountant on how to record an expense to a liability account. This way you can be sure that the figures you have in QuickBooks Online are accurate.

 

If you have some time, you can also take a look at this article: Recording and depreciating assets. It includes steps on how you can record a payment for a loan, along with setting up an interest expense account.

 

For any other questions, drop them in the comments below. I'd be glad to answer them for you.

Level 2

Re: How do I record an expense to a liability account

Hi. Will this method also work for creating a liability account for local payroll taxes? While I currently do not use QuickBooks Payroll, I do manually add my payroll information to QuickBooks Online via third party payroll software. I would like to keep track of a local Occupational Privilege Tax (OPT) in Colorado that is due at the end of each year. Thank you!

QuickBooks Team

Re: How do I record an expense to a liability account

Hello there, R_Crane. 

 

QuickBooks have a way on how to correctly enter payroll liabilities especially when you're not subscribed to the plan. I have an article here about recording payroll transactions manually. It gives you three scenarios on what situation best fits your business.

 

Also, if you want to rather create a liability account I recommend reaching out to your accountant. They can help you categorize on what account to use. 

 

Let me know if you need more help. Have a good one!

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