Set up a loan in QuickBooks Online

Learn how to record a loan in QuickBooks Online.

Did you recently get a loan? In QuickBooks Online, you can set up a liability account to record the loans payable. This account will track what you owe and any payments made.

Here's how to set up your liability account to track the loan. We'll also show you one way to put that loan money into your bank account.

Step 1: set up a liability account to record what you owe

First you need to create and set up a liability account so you can record the loan. Here’s how.

1. Go to Settings ⚙ and select Chart of accounts.
2. Select New to create a new account.
3. From the Account Type ▼ dropdown, select Long Term Liabilities. Then, select Notes Payable from the Detail Type ▼ dropdown. Note: if you plan to pay off the loan by the end of the financial year, select Other Current Liabilities from the Account Type ▼ dropdown, then Loan Payable from the Detail Type ▼ dropdown instead.
4. Give the account a relevant name, like "Loan for a car" or "Covid-19 relief loan."
5. Choose when you want to start tracking your finances. In the Unpaid balance field, enter the amount in the account, and determine the as of date. Enter today's date if you want to start tracking immediately.
6. Select Save and Close.

If you add a balance in the liability account during Step 1, you will need to make a second Journal Entry when you record the deposit.

Entering a balance already credits the liability account for the loan and uses an offset to opening balance equity. Adding the credit again step 2 will duplicate the entry to the liability account.

Second journal entry then needs to debit the liability account and credit opening balance equity.

Step 2: Record a loan repayment

When you're ready to pay back the loan, follow these steps to record each repayment.

1. Select + New.
2. Select Cheque.
3. Add a cheque number if you plan to send an actual cheque. If you use direct withdrawal or an EFT, enter Debit or EFT in the Cheque no field.

Then enter the following in the Category details section of the cheque:

1. On the first line, select the liability account for the loan from the Category dropdown. Then enter the payment amount.
2. On the second line, select the expense account for the interest from the Category dropdown. Then enter the interest amount.
3. On additional lines, add any additional fees. Select the appropriate accounts from the Category dropdown.
4. When you're done, select Save and close.