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mrswagg
Level 2

Loan to business from owner

I have a client that loaned his company money. I debited the bank account and credited the long term liability account. Now every month interest needs to be accrued. How do I do that? Now we paid him back $5000 and I need to know how to book that. I know part of it is principle and part of it is interest. 

1 Comment 1
LeizylM
QuickBooks Team

Loan to business from owner

Let me address your concern with recording long-term loans in QuickBooks Online, mrswagg. 

 

The Long Term Liability account is not automatically set up in Quickbooks Online (QBO). You'll need to manually create in the Chart of Accounts to track loaned amounts depending on how long you'll pay them. You can record long-term receivables from your customers by following these steps:

 

  1. Go to the Gear Icon.
  2. Under Your Company, choose Chart of Accounts.
  3. Click on New.
  4. In the Account Type drop-down, select Long Term Liabilities. 
  5. Under Detail Type, choose Notes payable.
  6. Then, fill out the information in the NameDescription, and Unpaid balance as of fields.
  7. Click Save and close.

 

Create a journal entry to record the money you got from the loan

 

1. Select +New.

2.Under Others, choose Journal Entry. 

3. On the first line, select the liability account you just created from the Account dropdown. Enter the loan amount in the Credits column.

4. On the second line, select your bank account from the Account dropdown. Enter the same loan amount in the Debits column.

5. Select Save and Close. 

 

Record a loan repayment

 

  1. Select + New.
  2. Under Vendors, choose Check. 
  3. If you're in Business view, follow the steps to switch to Accountant view first. Then come back to these steps.
  4. Add a check number if you plan to send an actual check. If you use direct withdrawal or an ETF, enter Debit or ETF in the Check # field.
  5. Enter the amount of the payment.
  6. Select Save and close.

 

Record the loan interest payments 

 

  1. Click the Gear icon.
  2. Under Your Company,  select Chart of Accounts.
  3. Click on New.
  4. In the Account Type drop-down, select Expenses.
  5. In the Detail Type, select  Interest Paid 
  6. Enter the name of the account you want.
  7. Click Save and Close.

 

 Once done, you can use the account when creating a check for the interest payment.

 

 

1. Select+ New.

2.Under Vendors, select Check or Expense.

3. Choose a Payee, a Payment date, and a Payment method.

4.Select the bank account, from the Payment account drop-down menu.

5.Select the Interest Expense account from the Category column.

6.Enter the amount of the interest charge.

7.Click Save and close

 

 

To know more about tracking customer loans, here's an article that you can refer to : Track customer loans.

 

I’m happy to offer assistance again if you have more questions about recording loan payments. I'm always here to lend a hand.

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