How to record a loan & loan repayment in QuickBooks DESKTOP & how to split principal and interest

@KasyHale  When you establish a loan that was deposited into a bank account, the simplest way to establish an opening balance is through the Make a Deposit window, using the liability (COVID loan) as the source account.

This increases the balance of the liability to its initial amount while increasing the bank account balance in a way that is easier for QB to source reports from.

If the loan was input incorrectly to begin with, and in a year that has already been closed, make a JE at the start of the first non-closed year to increase the liability to its correct value at that point in time. This will involve a credit to the liability. The account(s) debited will depend on exactly how the initial creation was mishandled.

The principal and interest payments should be broken down in each payment. If paying by check, you would use the Write Check feature using two lines under the Expenses tab; one for principal and one for interest expense. Ideally, this would be in the non-closed periods. As above, the exact way to fix this will depend on how it was mishandled to start with.

To add more money to the loan, use the same process as when you first received the loan; use the Make a Deposit window with the loan liability account as the source account.

Setting up a liability account, choosing your vendor, and creating an expense account, down to recording loan payments and interest are the steps we need to undergo to track loans in QuickBooks Desktop, Kasy. I'll share the steps in detail below.

Initially, tracking loan amounts should start with setting up a liability account for your loan. This will be important when you're about to record loan amounts and payments.

You can follow the steps below:

1. Go to Lists, then select Chart of Accounts (or use Ctrl + A shortcut key)
2. Select the Account dropdown, then click the New button (Ctrl + N shortcut key)
3. Select Other Account Types, then select the account type for your loan: You can select Other Current Liability for loans that are payable within a year. However, you can choose Long Term Liability for loans that are payable beyond a year.
4. Select Continue.
5. Fill out the Number and Account Name fields. Note that you can select the subaccount checkbox if you want to select the Subaccount checkbox for existing accounts. 
6. Select Save and Close.

Once you're done, you can select your vendor or the lending company you need to pay for the loan. After, we can now record the loan amount based on the type of loan and link it to the liability account that we created in the first part. 

For cash loans, here's how:

1. Go to the Banking menu, then select Make Deposits.
2. If the payments to Deposit window opens, select Cancel.
3. In the Make Deposits window: 
   
   • Check the Date and enter an optional Memo.
   • In the From Account column, select the Liability account.
   • In the Amount column, enter the loan amount.
4. Select Save and Close.

However, if you're trying to record loan payments for non-cash loans. 

We can follow the steps below:

1. Go to the Banking menu, then select Write Checks (Ctrl + W shortcut key).
2. From the BANK ACCOUNT dropdown, select the bank account you want to use to pay the loan.
3. Verify the details like Number and Date fields. You can always edit them as needed.
4. In the PAY THE ORDER TO dropdown, choose your preferred vendor or bank.
5. In the amount field, you can now enter the principal amount, which will also automatically fill out the AMOUNT field in the Expenses tab.
   • On the first line, enter the name of the liability account that you've created in the dropdown section then enter the payment for the principal amount.
   • On the second line, enter the interest expense account, then enter the payment loan interest.
6. You can also have the option to record transactions at regular intervals by clicking Memorize in the Memorize Transaction window.
7. Select Save and Close.

For further information, you can refer to this article to set up you vendor, along with the steps provided above: Manually track loans in QuickBooks Desktop.

Here's an article you can also read if you're trying to generate memorized transactions in QBDT: Create, edit, or delete memorized transactions.

I'm excited for you to put these steps into action, Kasy. Please know that you can always revisit and engage on this thread by clicking the Reply button. We're here to lend some help.

@JaneDave_I  "For cash loans, here's how:

1. Go to the Banking menu, then select Make Deposits.
2. If the payments to Deposit window opens, select Cancel.
3. In the Make Deposits window: 
   • In the Deposit To field, Select the liability account that we created in the first part. 
   • Check the Date and enter an optional Memo.
   • In the From Account column, select the Liability account.
   • In the Amount column, enter the loan amount.
4. Select Save and Close."

The underlined parts form a circular transaction.

It may be worth having the script writers update that part about 'In the Deposit To field'.