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Level 1

Recording interest payable

I know how to record entry when u pay interest however I had a question. Like if I take out a loan to finance my car. I perform journal entry. Then I will incur interest payment. when I receive bank statement I incur interest expense. if I take several day to make a payment , I will still need to record interest payable and loan amount payable as I incur it. How will I record it in Quick books online?

Solved
Best answer October 15, 2020

Best Answers
Level 15

Recording interest payable

Assuming the car is owned (titled to) the company

create a fixed asset account called car

create a sub fixed asset account called car - accum depreciation

create a long term loan liability account named for the loan

enter the down payment and use the car fixed asset account as the expense (reason) for the payment

then a journal entry, debit car fixed asset and credit loan liability for the total amount of the loan

 

when you make a payment use the loan liability account as the expense (reason) for the payment

when next months statement comes in it will show the amount of the previous payment that was interest, do a journal entry, debit interest expense and credit the loan liability for the amount back dated to the previous date of payment, then make the next payment.  Rinse and repeat each month

 

If the car is a personal car all the above does not apply, though you can use business funds to make the payments.  enter the payment and use owner equity drawing as the expense (reason) for the payment

View solution in original post

2 Comments
Level 15

Recording interest payable

Assuming the car is owned (titled to) the company

create a fixed asset account called car

create a sub fixed asset account called car - accum depreciation

create a long term loan liability account named for the loan

enter the down payment and use the car fixed asset account as the expense (reason) for the payment

then a journal entry, debit car fixed asset and credit loan liability for the total amount of the loan

 

when you make a payment use the loan liability account as the expense (reason) for the payment

when next months statement comes in it will show the amount of the previous payment that was interest, do a journal entry, debit interest expense and credit the loan liability for the amount back dated to the previous date of payment, then make the next payment.  Rinse and repeat each month

 

If the car is a personal car all the above does not apply, though you can use business funds to make the payments.  enter the payment and use owner equity drawing as the expense (reason) for the payment

View solution in original post

Level 1

Recording interest payable

Thank you. That was very insightful.

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