@Salessio0564
The initial entry to record the equipment fixed asset and the loan is shown in the journal entry (JE) below. IMO, it's best to create a $0 Expense transaction for the vendor with the Equipment and Discount on loan payable listed as positive amounts and the Loan payable listed as a negative amount. That creates a $0 Expense transaction and puts the transaction under the vendor's account. You will need to set up the Discount on loan payable liability account. It's necessary to balance the fixed asset value to the loan payable.
| | Debit | Credit |
| Equipment (Fixed asset) | 39,500 | |
| Discount on loan payable (long-term liability) | 20,500 | |
| Loan payable | | 60,000 |
The effective interest rate on this loan is 17.8584%. Run an amortization schedule on a 39,500, 60-month, $1,000 payment amount, 17.8584% loan to get the monthly interest and principal breakdown. Then, each month, when payment is made on the loan, you need to make an entry based on the JE below (example shows a month where the interest expense is $500). It's best to use an Expense or Bill transaction with the debits as positive amounts and the credits as negative amounts - leave off the cash credit because that's what you will choose under 'Payment account' on the Expense or Bill payment.
| | Debit | Credit |
| Loan payable | 1,000 | |
| Cash | | 1,000 |
| Interest expense | 500 | |
| Discount on loan payable | | 500 |
You may need to go back and update the original entry that put the fixed asset and loan on the books as well as the principal and interest breakdown on the three payments made in 2024.
