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Set up and track a line of credit in QuickBooks Online

SOLVEDby QuickBooksQuickBooks Online173Updated 1 month ago

Learn how to set up and track a line of credit in QuickBooks Online.

To track a line of credit, you need to set up two accounts if you don't already have them. One account is for tracking the principle, and the other is an expense account to track incurred interest.

Step 1: Set up a liability account for the principle

When you pay for things with your line of credit, you’ll record the transaction as a bill or expense in this account. Before you continue, make sure you’re in Accountant view.

  1. Go to Settings ⚙, then select Chart of accounts.
  2. Select New.
  3. From the Save account under dropdown, select Other Current Liabilities.
  4. From the Tax form section ▼ dropdown, select Line of Credit.
  5. Enter a name in the Account name field.
  6. Select Save.

Step 2: Set up an expense account for the interest

If you incur interest charges, you’ll record your paid interest in this account. 

  1. Go to Settings ⚙, then select Chart of accounts.
  2. Select New.
  3. From the Save account under ▼ dropdown, select Expenses.
  4. From the Tax form section ▼ dropdown, select Interest Paid.
  5. Enter a name in the Account name field.
  6. Select Save.

Track your line of credit

Once you’ve set up your two accounts, you can track the transactions on your line of credit. When you pay for things with your credit, make sure you record the bills and expenses. If you want to put your credit funds into another account, you need to make a transfer.

When you make a payment, you can track what you pay back to your bank or creditor. There are two ways to pay back your credit: 

Pay with a paper check

If you’re going to send the bank or creditor a paper check, follow these steps:

  1. Select + New.
  2. Under Vendors, select Check.
  3. In the Payee field, select or enter the name of the financial institution.
  4. Select the bank from the dropdown list in the Bank Account field.
  5. In the Category details section, select Line of Credit from the Category field and enter the amount you want to pay down the principal.
  6. In the Category details section, select Interest paid from the Category field and enter the amount you want to pay down the interest.
  7. Select Save and close.

Pay with a debit or credit card

If you’re paying the bank back with a debit or credit card, you can:

Either way, be sure to split the expense between principal and interest in the category details.

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