Line of credit setup and bank reconciliation

chuck27p · ‎October 15, 2018

I routinely have issues with the way the line of credit works in QB online. Perhaps it's just me. Here's the quick situation I have now.

I made a payment from checking account to line of credit account. For simple math, we'll make this easy. Let's say the payment was $100. $30 was principal, and $70 was interest. When the checking account syncs, it shows $100 debit. I created an expense for $100 and put $30 in an account of Line of Credit and $70 in an account of LOC Interest.

However, when the LOC syncs, it shows $100. BUT the balance is only going down by $30 since that's the principal. So what do I do? The LOC account in QB doesn't find the expense I entered to match up because it's only $30 and the LOC sync shows $100, which isn't accurate.

Am I doing this wrong? I'm confused. Thanks for the help.

Malcolm Ziman · ‎October 15, 2018

I noticed the same thing.

I also split the debit in the checking account, with the interest portion going to the interest expense and the rest going to the LOC liability account.

I don't think this is a QBO problem. This is how the bank sends the data to QBO.

There is very little activity in the LOC account, so I don't need to use the bank feed (what you are calling the "sync") for the LOC. I just ignore it. The LOC balance is correct because of the aforementioned split entry, which correctly reduces the LOC balance.

View solution in original post

Malcolm Ziman · ‎October 15, 2018

I noticed the same thing.

I also split the debit in the checking account, with the interest portion going to the interest expense and the rest going to the LOC liability account.

I don't think this is a QBO problem. This is how the bank sends the data to QBO.

There is very little activity in the LOC account, so I don't need to use the bank feed (what you are calling the "sync") for the LOC. I just ignore it. The LOC balance is correct because of the aforementioned split entry, which correctly reduces the LOC balance.

chuck27p · ‎October 15, 2018

Makes sense. I'll just either ignore the bank sync or stop syncing all together. Then the balance will match. Thanks.

JennyP714 · ‎March 10, 2020

So each time you transfer money from lets say an operating account, do you manually create the principal amount in the LOC's register?

Kendra H · ‎March 10, 2020

Hello, @JennyP714.

Before going into detail, I'd like to ask if you mean to transfer money between two accounts?

If so, you can use the Transfer option in QB Online to transfer funds between bank accounts.

Here's how:

Select New.
Under Other, choose Transfer.
From the Transfer Funds From drop-down list, click on the bank account that the funds are coming out of.
In the Transfer Funds To drop-down list, pick the bank account the funds are being deposited into.
In the Transfer Amount field, enter the amount being transferred.
Edit the Date.
Type a description of the transfer in the Memo field.
Pick Save and close.

If the steps above are effective, you can refer back to this detailed article: Transfer funds between accounts.

I look forward to chatting with you soon. Happy Tuesday!

christine4form · ‎April 28, 2021

How did you set up your LOC to begin synching? Did you just designate it as a credit card since that's the only option that's a liability?

christine4form · ‎April 28, 2021

@chuck27p forgot to tag you. did you set up the LOC initially as a credit card so that you could synch?

Ryan_M · ‎April 28, 2021

Hi @christine4form,

As the user @Malcolm Ziman stated above, he ignores these bank feeds since they're already recorded in QuickBooks Online (QBO).

To start tracking a line of credit in QBO, you'll need two accounts. One is for the principal, and the other is an expense account for the interest.

Follow these steps to create an account for the principal:

Click the Accounting tab.
Select New.
Set the Account Type to Other Current Liabilities, and the Detail Type to Line of Credit.
Enter a different account name if you want.
Hit Save and Close.

Here's how to create the expense account:

Go to the Accounting tab.
Tap New.
Set the Account Type to Expenses, and the Detail Type to Interest Paid.
Type in a different account name if you want.
Press Save and Close.

Take a look at this article for additional information on this process: Set up and track a line of credit.

Don't hesitate to drop a comment below if you have other questions about tracking LOC in QBO. I'll be sure to take care of it.

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Line of credit setup and bank reconciliation