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DiaA1
Level 2

Offset the payment of invoice against the loan

My company received long term loan. And later I paid for my lender an invoice he asked to pay. How should I make entries in accounting to reduce the amount of loan for amount of invoice I paid ( + bank commissions I was charged for the payment)?

Solved
Best answer June 26, 2020

Best Answers
AlcaeusF
Moderator

Offset the payment of invoice against the loan

I appreciate you for getting back to us here in the Community, @DiaA1.

 

Let me share some clarification about the payment in QuickBooks Online.

 

The detailed steps provided above is the normal process of how to record the loan and payments to reduce liability. However, to offset the invoice payment against the loan, you'll need the advice of an accountant.

 

One of them will be able to assist you further with the best account to use to reduce the liability correctly. Also, please know that we can't suggest which account you should select in this type of situation.

 

Additionally, I recommend the following resource about creating a journal entry: Create a journal entry in QuickBooks Online.

 

Please know that I'm just a post away if you have any other questions. Have a great day ahead.

View solution in original post

3 Comments
AlcaeusF
Moderator

Offset the payment of invoice against the loan

Welcome aboard to the Community, @DiaA1.

 

I can provide some information about how to handle a loan in QuickBooks Online.

 

Since it's a long term loan, you'll need to create a Long Term Liabilities account to record what you owe. Once done, If you plan to put your loan money directly into your bank account, we suggest creating a journal entry.

 

Here's how to create a liability account:

 

  1. Click the Gear icon and select Chart of Accounts.
  2. From the Account Type ▼ dropdown menu, select Long Term LiabilitiesNote: If you plan to pay off the loan by the end of the current fiscal year, select Other Current Liabilities instead.
  3. From the Detail Type ▼ dropdown, select Notes Payable.
  4. Give the account a relevant name, like "Loan for a car".
  5. Enter necessary information.
  6. Hit Save and Close

To record the money you got from the loan:

 

  1. Select + New.
  2. Select Journal entry. Or, if you're in Business view, switch to Accountant view first. Then come back to these steps.
  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. When you're done, select Save and close.

After following the steps above, you can now reduce the amount by recording a loan payment. Please follow these steps:

 

  1. Select + New.
  2. Select Check. Or if you're in Business view, follow the steps to switch to Accountant view first. Then come back to these steps.
  3. Add a check number if you send an actual check. If you use direct withdrawal of EFT, enter Debit or EF in the Check # field.
  4. Enter the following information in the Category Details section.
    1. First line: Liability account for the loan and the amount of payment.
    2. Second Line: Expense account for the interest and the amount.
    3. Additional lines: Any additional fees along with the appropriate accounts.
  5. Select Save and close.

For the bank commissions charged, I suggest seeking expert advice from an accountant. This way, we'll be able to ensure your books are accurate and up to date.

 

Also, I've attached some articles you can use to records loans, as well as making payments:

 

Please know that the Community has your back if you need assistance. It’s a place for you to connect with experts and peers. Wishing you and your business continued success.

DiaA1
Level 2

Offset the payment of invoice against the loan

The main issue is about invoice payment.
Who account should I show as it is not expense for my business. And later after invoice is paid - how to reduce my liability in records?

AlcaeusF
Moderator

Offset the payment of invoice against the loan

I appreciate you for getting back to us here in the Community, @DiaA1.

 

Let me share some clarification about the payment in QuickBooks Online.

 

The detailed steps provided above is the normal process of how to record the loan and payments to reduce liability. However, to offset the invoice payment against the loan, you'll need the advice of an accountant.

 

One of them will be able to assist you further with the best account to use to reduce the liability correctly. Also, please know that we can't suggest which account you should select in this type of situation.

 

Additionally, I recommend the following resource about creating a journal entry: Create a journal entry in QuickBooks Online.

 

Please know that I'm just a post away if you have any other questions. Have a great day ahead.

View solution in original post

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