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RealBuilders
Level 1

How do I set up a line of credit account so that it shows the payment applied decreases the account? currently the pyments are increasing the balance.

 
4 Comments 4
GlinetteC
Moderator

How do I set up a line of credit account so that it shows the payment applied decreases the account? currently the pyments are increasing the balance.

Hi there, bobbi-williams52.

 

I'l be glad to help you with setting up a Line of Credit in QuickBooks Online. If you wish to track a line of credit, you need to set up two accounts. One for the principal and the other is for an expense account. Let me show you how:

 

To set up for a principal account:

 

  1. Go to the Settings ⚙ icon, then select Chart of Accounts.
  2. Select New.
  3. From the Account Type ▼ dropdown arrow, select Other Current Liabilities.
  4. From the Detail Type ▼ dropdown menu, select Line of Credit.
  5. Select Save and Close.

To set up an expense account for the interest:

 

  1. Go to the Settings ⚙ icon, then select Chart of Accounts.
  2. Select New.
  3. From the Account Type ▼ dropdown menu, select Expenses.
  4. From the Detail Type ▼ dropdown menu, select Interest Paid.
  5. Select Save and Close.

For more information, please refer to this article: Set up and track a line of credit 

 

Using the above steps, you're now able to set up the line of credit account to show the payment that will decrease the account.

 

Please tag me directly if you need anything else.

RealBuilders
Level 1

How do I set up a line of credit account so that it shows the payment applied decreases the account? currently the pyments are increasing the balance.

Thanks a bunch for your quick response. Let me clarify my question. I set up the line of credit as a liability account already and linked it to the LOC account at my bank so that it will auto feed the account. The issue I am having is that the transactions are feeding into Quickbooks with incorrect debits/credits. As payments are made Quickbooks is increasing the account balance as if it's an asset account instead of decreasing the liability. As money is drawn from the line of credit it's decreasing the balance instead of increasing the liability. Does this mean I can't use the account link to auto-transfer the activity to Quickbooks and instead perform these entries manually?

RealBuilders
Level 1

How do I set up a line of credit account so that it shows the payment applied decreases the account? currently the pyments are increasing the balance.

Thanks for your quick response. Let me clarify my question. I have already set up the liability account and linked my line of credit account from my bank to Quickbooks. As the transactions feed into Quickbooks the debits/credits are backward. Payments are reflected as an increase to the account as if it's an asset account and advances are reflected as a decrease to the account instead of increasing the liability. So now my balance between Quickbooks and the line of credit account doesn't agree. Does this mean I can't link the account and instead I need to perform these transactions manually?

MarsStephanieL
QuickBooks Team

How do I set up a line of credit account so that it shows the payment applied decreases the account? currently the pyments are increasing the balance.

Hi there, @RealBuilders.


Yes, you'll need to enter the transactions manually. QuickBooks is unable to connect a loan account through the Banking menu. I'll show you how to enter the transactions in QuickBooks.

 

Here's how to record repayment of the Line of Credit (LOC) or payment of interest charges, with screenshot for additional reference:

 

  1. Go to the New + button and select Check.
  2. Enter the Payee's name and choose the Bank Account you want to make the payment from by clicking the drop-down icon.
  3. In the Category details field, click the drop-down arrow and choose the line of credit account.
  4. Enter the amount being paid.
  5. Click Save and close.

    loc1.jpg

To pay bills where funds have gone directly from the LOC to the vendor:

 

  1. Go to the New + button and select Journal Entry under the Other column.
  2. Enter the date in the Journal date box.
  3. On the first line, click the Account drop-down arrow and select Accounts Payable.
  4. Under the Debit column, enter the amount you paid the vendor and enter a description like, “Paid from line of credit.”
  5. Under Name column, click the drop-down arrow and select the vendor you paid.
  6. On the second line, click the Account drop-down arrow and select the line of credit account.
  7. Under the Credit column, enter the amount you paid the vendor (this should pre-fill). Once done click Save and close. (I added a screenshot for your reference below.)

    loc2.jpg

There are series of transactions you can do with your LOC, please check out this article: Set up and track a line of credit.

 

For future reference with reconciling your account, I can see this article to be essential in this task: Learn the reconcile workflow in QuickBooks.

 

I'll be here ready to help if you need anything else with QuickBooks. Keep safe.

 

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