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Best way to enter a loan payment?

I have a loan set up as a balance sheet account in QBO. I will make an electronic payment to this loan periodically. Should I do it as a "transfer" or as a "journal entry"? I don't need to record the interest with the payment so it could be a transfer (interest is billed and paid separately from principal payments). Thanks!

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Best answer 02-27-2019

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Established Community Backer ***

Re: Best way to enter a loan payment?

Transfer or JE? Neither and never. Transfers are between same type accounts, mostly bank to bank. You are paying a liability from an asset. JE will just mess you up when all you want to do is record a check.

 

Use Write Check for payment against principal (the COA account) and post interest as a charge. To properly do this the easiest a loan of this type should be set up as a credit card type and enter the interest as cc charge. Otherwise you will want to post a zero sum Expense that offsets charged interest to principal 

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Established Community Backer ***

Re: Best way to enter a loan payment?

Transfer or JE? Neither and never. Transfers are between same type accounts, mostly bank to bank. You are paying a liability from an asset. JE will just mess you up when all you want to do is record a check.

 

Use Write Check for payment against principal (the COA account) and post interest as a charge. To properly do this the easiest a loan of this type should be set up as a credit card type and enter the interest as cc charge. Otherwise you will want to post a zero sum Expense that offsets charged interest to principal 

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