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info898
Level 1

What is the correct way to categorize the SBA EIDL loan on the business' books?

Should this be established as a long term liability account and then the funds transferred into my bank account as a transfer?
1 Comment 1
MirriamM
Moderator

What is the correct way to categorize the SBA EIDL loan on the business' books?

Welcome to the Community space, @info898.

 

When setting up a liability account to record what you owe, you can select Long Term Liabilities. But if you plan to pay the loan by the end of the current fiscal year, then you can pick Other Current Liabilities instead.

 

To set up a liability account to record the loan, follow the below steps:

  1. Click the Gear icon at the top. 
  2. Choose Chart of Accounts.
  3. Hit the New button to create a new account.
  4. Set the Account Type to Other Current Liabilities or Long Term Liabilities depending on the type of your loan.
  5. Select Notes Payable as Detail Type.
  6. Enter the name of the loan.
  7. Tap Save and Close.

When done, create a journal entry. Here's how:

  1. In the left menu, click the + New button. 
  2. Choose Journal entry.
  3. Select the liability account under the Account column on the first line and enter the loan amount in the Credits column.
  4. On the second line, choose the asset account or the appropriate account and put the loan amount in the Debits column.
  5. Hit Save and close

Lastly, create an expense or a check transaction to record the loan payment:

  1. In the left menu, click the + New button. 
  2. Under the Vendor column, choose Check or Expense
  3. If you send an actual check, enter the check number. If you pay online, use direct withdrawal, or EFT, enter Debit or EF" in the Check/Cheque # field.
  4. In the Category Details section, enter Liability account for the loan and the amount of payment in the first line. Then, Expense account for the interest and the amount for the second line. And any additional fees along with the appropriate accounts on the additional lines.
  5. Choose Save and close

For more details about this process, take a look at this article: Set up a loan in QuickBooks Online.

 

I'm just a couple of clicks away if you have further questions, leave me a comment below. I'm here to help. Take care and have a great day.

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