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thewinebrothers
Level 2

Line of Credit

I recently set up a line of credit in our quickbooks, following instructions that I received from a call with quickbooks - but it's not working correctly. When I "transfer" funds, it's putting the amount in the "increase" section of the report. It's showing correctly in the bank account, but not in the line of credit - so it's showing that the number is a lot higher than what it is, and I am trying to keep it accurate. I sat on the phone with quickbooks for about 3 hours with no luck. I was hoping someone could assist me in keeping and tracking the credit link correct, including the interest and other fees that are associated with it. I can provide pictures if needed. thanks in advance!

17 Comments 17
Erika_K
QuickBooks Team

Line of Credit

Thank you for bringing this concern to our attention, thewinebrothers. Your efforts and time spent with our support are valued. Allow me to contribute further insights and information regarding the process of identifying the differences between your Line of Credit (LOC) and bank account.

 

To provide you with accurate resolutions, I'll need to ask you a few questions. Have you transferred funds from your bank account to the LOC? If you have, moving money from your account to LOC causes an increase in the LOC balance. If not, may I ask for a screenshot of the issues you're experiencing? Also, may I know the specific name of the report you're using? It'll allow me to relay accurate information so you can determine why you're having differences with your balances.

 

In the meantime, I'll further share the details about using LOC. The process of recording and determining which transactions to create depends on how you use the LOC. If you use it to deposit money into your account, use the Transfer Funds or Make Deposits option to increase the bank balance. If you're paying the LOC, you can create a check. When using it for purchases, enter journal entries or other expense transactions in the system. Then, when making payments, use a check for easier recording and tracking.

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Additionally, I recommend consulting a qualified accountant or financial professional to provide additional guidance to ensure you're on the right track.  

 

Remember, thewinebrothers, I'm here to support you every step of the way. Feel free to reach out whenever you have questions or need assistance managing your account balances. Let's work together to ensure your account management processes are efficient and effective.

BigRedConsulting
Community Champion

Line of Credit

Not sure what report you're using?

When you have a line of credit, a liability, and you transfer funds to your checking account, balances in both the line of credit and the bank account should increase. Are you seeing something different?

thewinebrothers
Level 2

Line of Credit

No, they are both increasing - but I guess I do not understand why. I guess I was assuming, for example .. if the LOC was for 100,000 - and i transferred $5,000 to the checking account, why it would not go down to $95,000 showing what I have available? I am just trying to accurately keep record of it and I have some knowledge of quickbooks - mostly quickbooks online, so I am kind of lost. When I first started QB desktop had the "loan manager" but when I upgraded, it was no longer there. 

 

thewinebrothers
Level 2

Line of Credit

Do you think that you would be able to assist me?

thewinebrothers
Level 2

Line of Credit

Hello,

 

I think I may have discovered what the problem is. When I created the line of credit, I was told to put in what the amount of the line of credit received was, but I think that is making it the starting balance and not what is available, so it's looking like we are adding to the balance instead of decreasing it. I have attached the screenshot. I think my opening balance should be $0?Screenshot 2024-07-30 114607.png

Accracy Accounting
Level 5

Line of Credit

You got a LOC for 100,000 but you transferred only 5,000 to your bank account.

 

Create a Transfer:

1) From - Line of Credit for 5,000

2) To - Bank Account for 5,000

This will increase both your bank account and LOC liability by 5000

Note that you have utilized only 5,000 out of 100,000 available LOC. The starting 100,000 was not a liability to being with and remaining 95,000 is not something you should be reflecting on your books. Basically, you owe your LOC bank only 5000 so far because that's what you have borrowed hence only 5,000 sitting in the LOC liability account.

Accracy Accounting
Level 5

Line of Credit

Correct starting LOC Liability account should be zero

thewinebrothers
Level 2

Line of Credit

hi! thanks for your reply!

so, I should remove the beginning balance (i put the amount of the loan we received as the beginning balance, that is how i was told to do it when i contacted quickbooks support) so the beginning balance is $0? and that way it only increases by what we actually take out because that is what we actually owe?

BigRedConsulting
Community Champion

Line of Credit

RE: if the LOC was for 100,000 - and i transferred $5,000 to the checking account, why it would not go down to $95,000 showing what I have available?

 

It won't do that. An accounting system doesn't know your available balance, it only knows your actual balance.  This is similar to a credit card account, where it knows the credit card balance, but not how much you can borrow.

 

When you open a line of credit, and you can borrow up to $100,000, but you haven't borrowed anything yet, the account balance is 0.00.  When you then borrow money, say $5,000, and deposit it in your bank account, the line of credit balance is then $5,000.

 

Make sense?

Accracy Accounting
Level 5

Line of Credit

Yes, beginning balance is zero. Balance as of today would be 5,000 because that's what your owed.

I think you got it now.

thewinebrothers
Level 2

Line of Credit

great - thanks!! 1 last question (hopefully!) how do i account for the interest that is accrued? 

BigRedConsulting
Community Champion

Line of Credit

When you get your account statement, add the interest expense to the line of credit balance. Do this in the account's register.

Accracy Accounting
Level 5

Line of Credit

Let's say at the end of the month you get your LOC statement with 300 interest and another 20 as admin fee

 

Create Journal Entry (Accrue Interest + Admin Fee)

Debit - Interest Expense for 300

Debit - LOC Admin Expense for 20

Credit - Line of Credit Liability for 320

 

When Paid

Debit - Line of Credit Liability for 320

Credit - Bank for 320

thewinebrothers
Level 2

Line of Credit

like this?Screenshot 2024-07-30 132427.png

Accracy Accounting
Level 5

Line of Credit

Yes

thewinebrothers
Level 2

Line of Credit

OK thanks so much. and i'm not trying to be a pain, just want to do it correctly. is the best way to just delete the journal entry of the beginning balance? i don't want to mess anything up internally - or should i start over?

Accracy Accounting
Level 5

Line of Credit

I assume by beginning balance you mean the total LOC amount available for you to utilize then yes, you can delete that. It shouldn't be on your books.

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