Line of Credit

If you're using bank feed (sync with your bank account), you should use Credit Card type in QuickBooks which is also the current liability in the Balance Sheet. You can name account as Line of Credit if you want. It makes so much easier to transfer funds between accounts.
Forget writing Journal Entries. Those days are gone. Or someone is not up to speed.

Hi Steve,

It shouldn't take too long to sort this out. I'm happy to jump on a call with you today to get it straightened out.

My office line is 204-500-1100

Best

Chris

thank you @vpcontroller. That's what I will do!

Classifying it as a credit card is going to summarize to the "Credit Card" sub-heading on the quickbooks balance sheet. I wouldn't send a statement out to the bank that was presented like that. 

I haven't noticed any impact when transfering funds between accounts. What happens for you?

Steve

we can download a statement each month from Chase, just like checking and card, so I a, able to reconcile the account. In our account, I still have to do a journal to transfer out the interest si ce the lump some is what transfers from Chase.

Steve

we can download a statement each month from Chase, just like regular bank accounts.

Thanks for the clarity @vpcontroller. This is the approach that makes sense to me!

Your last paragraph you said  here... "But it also matters if your drawing on the LOC results in deposits to your regular Checking. If so, you only need Liability, because you are depositing and paying to and from checking and there are no details for any data entries for the LOC running balance." actually hits the mark for what I have. It has me thinking what to do if I already set up the LOC as a credit card. I have not yet attempted any bank feeds but I do get the bank feeds into the regular checking.

I am learning so much in this conversation thread. Thank you everyone for the comments.

I know we can connect bank feeds with Chase credit cards just like regular checking accept that it is reversed. I'm seeing that my Line of Credit just has a running balance which is new to me as I don't receive a statement that has a definite starting and ending balance number at the end of each month. 

"what to do if I already set up the LOC as a credit card...I know we can connect bank feeds with Chase credit cards just like regular checking accept that it is reversed"

When you see it Backwards, you have the wrong account type. LOC draw is a Liability = you are more in debt. Putting it into Checking to use it is why it isn't Also bank; you already have Bank = the real checking account, for the process.

If you Spend from the LOC, it is like a Cardless Credit Card account, and the debt increases = does not show negative, because increasing debt as Positive values is the "normal" activity for CC account use = your Spending.

Or, you draw from the LOC such as, overdraft protection to Banking = Deposit to Checking, from LOC liability or Short Term Liability account. All actual spending is in Checking.

"my Line of Credit just has a running balance which is new to me as I don't receive a statement that has a definite starting and ending balance number at the end of each month"

If you can download a statement, you are seeing the activity and you Can Reconcile this account. All statements show a starting and an ending balance. Transaction or Activity reports might not inlcude a starting or ending or running balance.

Think about it like this: Would you borrow from someone that Never told you, "Here is where your account balance is, for this specfic date?" They have a Fiduciary responsibility to you and they report to you that data, which is your Outside Source of Reference to use to Reconcile your data to theirs.

Remember, they can be the one that Made a mistake. Reconciliation isn't just for your Own Needs.  For one of my client accounts, Bank of America sent Customer Payments ACH (eft) three months in a row. The typical customer pays $60 a month. These payments were nearly $2,500 each month. It wasn't our money and we knew they would be getting it back.

True, true, and true. That is the best explanation and speaks to me. So relevant. Thank you kindly for taking some of your generous time to really speak to me. I am better off, thank you @qbteachmt

I am trying to set up a line of credit account in my chart of accounts, can you please help me with the setup?

Greetings:

When I set up a client with QBO Plus about four years ago, I was able to link a line of credit account to the bank and it would update with automatic bank feeds.  The line of credit still works with bank feeds, and it's in the Chart of Accounts as Account Type: Long Term Liabilities, Detail Type: Other Long Term Liabilities.  Now, the client has a new LOC with another bank, and when I attempt to link it, the drop down list is restricted to only Bank type accounts.  How can I link the new LOC in bank feeds?

Thank you.

Hello there, @GregC.

At this time, linking a liability to your bank is unavailable in QuickBooks. In the meantime, the banking features are only intended for credit card and bank accounts. That said, it needs to be recorded manually by adding creating a liability account on the Chart of Accounts. 

To give you more insights on how online banking works, you can refer to this article:

• How to use Online Banking, Connect Bank Accounts, and Review your Bank Feed in QuickBooks Online

Post again if you have any other questions. I'm always here to help. Have a good day!

Hi, Grace, and thank you for your reply.

Right now, I have a client whose LOC I linked in bank feeds.  Please see the attached file that contains screen shots of the account set up in the COA, and the same account in Banking.

I did it a few years ago, so why not now?

Sincere regards,

Greg

It's our pleasure to help, @GregC. 

With the latest update in QuickBooks Online, you can set up and track your line of credit by creating an account for the principal and an expense account for the interest. 

Step 1: Set up an account for your Principal account:

1. Go to the Gear icon (⚙), select Chart of Accounts and select New.
2. Set the Account Type as Other Current Liabilities and Detail Type as Line of Credit.
3. Enter a name and then select Save and Close.

Step 2: Set up an expense account for the interest

1. Go back to your Chart of Accounts to create a new account.
2. Set Account Type as Expenses. The Detail Type as Interest Paid.
3. Enter a name and then select Save and Close.

After that, to track credit funds into another account, you need to make a transfer. For charges, record them in your dedicated expense account for paid interest.

If you’re recording a payment, check the steps outlined in this article on how to record a payment to your line of credit. Then, for things you paid through credit, make sure you record the bills and expenses.

For follow-up questions, let us know in the Reply section below. 

I have set up our line of credit and interest account as you've outlined here, however, I don't have a way to show expenses that are paid using the LOC checks.  I've seen the discussion where users say they set the LOC up as a credit card account which makes sense to me as there is also a card associated with this account.  What is the disadvantage of setting the account up as a credit card account?  It is still a liability.  If I should leave as is, how do I record expenses that are paid with funds from the LOC?

I really hope you can help me:

I understand the account setup, but I can't figure out how to enter in the closing costs that were taken out of the LoC Available Balance immediately upon the account opening, i.e. LoC is $100,000, but the availabile funds are $105,000 after closing costs. 

Can you offer some advice on how to accomplish this? 

I have a line of credit for $2000, I access and use this line via a visa card. I've set up 2 accounts, a LOC under chart of accounts > Other Current Liability > Line Of Credit. I've also gone ahead and set up a Credit Card Account to handle expenses I use the money for. I've transferred $1000 as a draw to my business bank account and $1000 to the credit card account I set up. My line of credit now shows $4000 ( as I'd set up an initial balance when I opened the account of $2000 )

My Questions Are

1) Should this have been a -negative number or left blank?

2) Is the above setup correct?

3) How do I get the line to reflect the correct amount of $2000 after the fact?

Thanks for your assistance

Can you please help me?? How do I record money coming in and out of the LOC to balance with my bank statement? We make payments to LOC from our checking account. But to reconcile the LOC, I am so confused and lost. I need help !!!