Line of Credit in QuickBooks desktop

Thanks for posting here, @Suarez-L,

The process of recording Line of Credit in QuickBooks can be confusing, but once you get a hang of it, then it should be easy for you. I want you to know that I’m happy to explain anything in more detail so you're guided properly.

For the first step, we need to create the Line of Credit account in the COA. Here's how:

1. Go to Lists menu then Chart of Accounts.
2. Right-click anywhere then press New.
3. Choose Loan then Continue. If you don't see this option, pick Other Account Types then Other Current Liability
4. Press Continue to proceed.
   
5. Enter the details of your LOC then press Save and Close.

Regarding the process of how you record and which transactions to create depends on how you use the line of credit for. If you use the LOC to put 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 simple write checks from the Banking menu. To do that, follow the steps below:

1. Go to the Banking menu then Write Checks.
2. For the Pay to the Order of field, enter or add an LOC vendor.
3. Add the interest and the principal or the LOC account we created earlier (Loan or Other Current Liability).
   
4. After putting the amount Save and Close.

When you use the LOC to purchase something, you can use journal entries or other expense transactions in QuickBooks. Then when you pay, use a check so it's easier to record and trace the payment.

By following this, you should be able to match and balance the entries in the register.

If you have any questions about the steps or the process, just reply to this thread and it will come right back to me. Have a good one!

@Jen_D Thank you so much for your quick response ! I truly appreciate it :) As you can see I am a newbie and II am so glad to have found this community. I'm such a newbie. Let me tell you my  situation, we have a LOC set up already and we use to transfer money to our checking acct. When we pay the LOC, I have been creating a Bill. I didn't know about the "transfer funds". Currently our  LOC in QB shows a totally different amount than what I show in our bank statement. So is my " ending balance" in QB for the LOC, supposed to match my bank LOC account? 

I am so lost.  

Yes, @Suarez-L.

In terms of reconciling your Bank account and LOC, it should match each period of reconciliation to make sure that your reporting and books are accurate. Here's how to reconcile your account:

1. Review your opening balance, this should match your real-life bank account.
2. Once done, go to the Banking menu and select Reconcile.
3. From the Account field, choose the bank or credit card account you want to reconcile.
4. The Statement Date is automatically filled in. Usually, it's 30 or 31 days after the statement date of the previous reconciliation. Change it as needed to match your bank statement.
5. Then, QuickBooks also automatically enters the Beginning Balance. Ensure it matches the beginning balance on your bank statement. If it doesn't, here's how to fix your beginning balance.
6. Enter the ending balance, in the Ending Balance field.
7. Input the amounts of the Service Charge and Interest Earned. If your bank statement shows a service charge or interest that you have not yet entered. Don't enter charges you've already added.
8. Check the fields. If all data are correct, tap Continue to start reconciling.

For your reference, see our Reconciliation guide page. 

Also, it is recommended to always create a backup copy of your company file before making any changes. This is to make sure you have an original copy that you can restore at any time in case of data loss or damage.

Then, to review your past reconciliations, you can pull up the Previous Reconciliation report. 

Let me know by posting a comment below if you need further assistance in managing your accounts in QuickBooks. I'm always here to help. Have a good one. 

@DivinaMercy_N 

Thank you so much for your input. I am current' using QuickBooks Desktop pro 2019. I have never reconciled our LOC or Credit Card accounts. I'm glad to know this information for when I have converted to QBO. 

I know this is a bit old, but I am setting a LOC up just as above and the entries are backwards. When I transfer from the LOC to my bank account it adds to the balance of the LOC and when I write a check from my bank account to the LOC it deducts from the LOC balance. I'm hoping I missed something simple, I do transfers between other accounts all the time without issues. Using Enterprise Desktop 2021

Good day, SB_77.

I appreciate the detailed information about your issue with LOC. 

The unexpected behavior might be caused by a corrupted file. Running the Verify/Rebuild utility can detect data damage in QuickBooks Desktop. Here's how:

To verify:

1. Go to the File menu.
2. Select Utilities.
3. Click Verify Data.
4. Then select OK to close all windows. 

To Rebuild:
 

1. Click the File menu.
2. Select Utilities.
3. Click Rebuild Data, then select OK to close all windows.
4. QuickBooks will ask to make a backup before rebuilding your company file, select OK. 
5. Once the rebuilds are finished, click OK.

You can also check this link for more details about the process: Verify and Rebuild Data in QuickBooks Desktop.

I've also included here a guide on resolving any possible data issues: Fix data damage.

Keep me posted on your results after trying these steps. I'm here to ensure your success.

You may have entered the Line of Credit as an Other Current Asset instead of an Other Current Liability. That would create the issue you're having. 

If you accidentally set up the account as an other current asset instead of an other current liability, it would create this issue as well. Please check that first. 

I came across these steps, and they're very well explained. thank you

If I could ask, is it best to add a beginning amount/ LOC  principal? I've been recording my transaction just as you've mentioned but noticed I never added the principal amount.

Can someone please guide me through the steps to adding the principal if possible?

Lastly, if I have two different LOC from the same bank but each has its account number.  "When recording payment/writing check-in QB desktop is it best to write check PAY TO THE ORDER Of the bank name or use the name of the bank and last four of the account number to separate both loans.? 

Thank you