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pr3johns
Level 1

I'm trying to pay an expense using a loan account (loans to others) in QBO, which is not allowed. Any advice on setting this up?

Our company has made a loan to a consultant company. They will use the money to do some work for us on our behalf. I have recorded the loan in QBO as an "other current asset" account under detail type "loans to others". No problem.



The consultant is now doing work and paying bills using the loan $$. As they incur expenses they are sending me bills to keep a paper trail.



What I want to do now is REDUCE the amount of the loan according to the expenses incurred. To put it simply: I want to "pay" a bill using the loan account.



I tried simply entering a bill in QBO, then clicked "pay bills". Then I told QBO to use the "loans to others" account to pay the bill. But QBO will not allow this. It gives me an error saying I cannot use this account to pay a bill.



Can someone advise me as to the best way to set this up?
4 Comments 4
Rustler
Level 15

I'm trying to pay an expense using a loan account (loans to others) in QBO, which is not allowed. Any advice on setting this up?

in this instance you have to use a journal entry

 

debit the expense account and credit the loan to others asset account

pr3johns
Level 1

I'm trying to pay an expense using a loan account (loans to others) in QBO, which is not allowed. Any advice on setting this up?

Thanks this is helpful, but a follow-up question arises. When I initially recorded the loan as a journal entry, there was a DEBIT to the "loan" account and a balanced CREDIT to "accounts receivable".

 

Now when I make the journal entry to credit the loan account and debit the expense account, the accounts receiveable amount doesn't decrease, it stays at the original loan amount. I'm thinking this is wrong and accounts receivable should go down.

 

To rectify, I believe either I have to change the original loan journal entry to be a credit to the EXPENSE account or the loan repayments should debit "accounts receiveable" instead of expenses.

 

Does this make sense?

Rustler
Level 15

I'm trying to pay an expense using a loan account (loans to others) in QBO, which is not allowed. Any advice on setting this up?

when you made the loan, you should have written a check and use that loan account as the expense (reason) for the payment. as a journal entry that would be debit loan, credit bank. A/R does not come into it, A/R is for sales invoices in QB.

pr3johns
Level 1

I'm trying to pay an expense using a loan account (loans to others) in QBO, which is not allowed. Any advice on setting this up?

I see, that's what I mixed up. I followed the instructions here https://quickbooks.intuit.com/learn-support/en-us/accounts-receivable/track-customer-loans/00/185723 

 

on how to make a loan to customer, which suggests balancing the "loan" with "A/R". 

 

Thanks for your help.

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