Record loan payment in QuickBooks by creating a liability account. Since a loan, both cash and non-cash asset, is a liability account, you can track both the amount as well as interest payments through the same or different accounts. In this article, you’ll discover more about setting up invoices that can be paid with a loan prepayment to avoid paying interest.
Why Setup Loan in QuickBooks?
QuickBooks allows you to manage your loan meticulously easily. If you procure a loan for purchasing an asset, then you can keep track of that asset in asset accounts. And if you want to keep watch over the loan balance, then you will need to create a liability account.
- Furthermore, QuickBooks comes with a Loan Manager which shares information with your firm’s file.
- It helps calculate the loan’s payback schedule
- It posts the principal paid and interest paid for every payment to its precise accounts
- Plus it also aids in handling escrow and fees
However, before you start using the QuickBooks Loan Manager; you will need to create the following accounts.
They are as follows –
- Liability Account
- A Loan Interest Account
- An Escrow Account
- An Expense Account
- The Lender Account
Also Read : QuickBooks PPP Funds to show up in the Banking section of QuickBooks
Steps to Setup Loan in QuickBooks
For a short-term or long-term loan to record and track the loan deposit amount and all loan repayments.
Total Time: 35 minutes
Enter a Loan in QuickBooks
💠 Step 1 – Launch QuickBooks and head over to the Settings option. Then select the ‘Charts of Accounts’
💠 Step 2 – Click/tap on the select NEW option to create a new account
💠 Step 3 – Use the account drop-down menu and opt for ‘Non-current liabilities’. However, if you are confident in paying off the loan by the completion of the existing financial year, then you can opt for the option ‘Current Liabilities’
💠 Step 4 – Use the detail type dropdown option and choose ‘Notes payable’/’Loan Payable’. Also, give a relevant name to that account.
💠 Step 5 – Select from when you want to begin tracking your funds. In the unpaid balance field; you have to input the funds in the account.
You also have to determine the (as of xxx date). If you wish to begin tracking the amount immediately; you can input the current date and start monitoring ASAP.
💠 Step 6 – Once all the above steps are done, simply hit the Save & Close option.
If You Wish to Put it Directly into the Bank, Then Follow These Steps
💠 Step 1– Choose + ‘New’ & Pick the journal entry
💠 Step 2 – Pick the liability account and enter the loan account in the ‘Credits’ section
💠 Step 3 – Then pick the bank account for the Account dropdown. And add the loan amount in the Debit’s section.
Create a Vendor Account
Get started with the vendor application process.
Vendor Information
You need to provide the following information to create a vendor account:
1) Name
2) Company or Organization
3) Address
4) Phone Number
5) Email Address
6) Payment Information (i.e., Credit Card Number and Expiration Date, along with an alternate method of payment if your preferred option is unavailable). You will also need to provide a Tax ID for your company.
Create an Expense Account
Before creating a expense account know about the full details of this.
What is an Expense Account
An expense account is an account that is used to track the expenses incurred over the course of a given period. An expense account can be created with or without a limit on what you can spend in a given time frame. For example, if you wanted to keep track of your monthly expenses, you would choose a number that is divisible by 12 and use it as the limit. If you wanted to keep track of your yearly expenses
How to Start Your Expense Account
If you want to be able to track your budget, it’s important that you start with an expense account. You can use a spreadsheet or an app, but whichever you prefer is up to you. All that matters is what works for you and what makes it easy for you to stick to your budget.
Tracking Your Spending’s
Tracking your expenses can be difficult, but it is sure to make you feel more in control of your finances. To make tracking your expenses easier, follow these guidelines:
- Track everything, even the small things.
- Set up an account with a bank or bank app that allows you to connect all accounts so you can easily see how much money is going in and coming out.
- Use the same account for all of your bills.
Create a Budget for Your Accounts
Once you know your income, it’s time to create a budget. This will help keep you organized and will make it easier for you to track your spending habits. If you want to set up an expense account in Excel or QuickBooks software, this is a great way to do that. Set up a category that includes all of your expenses so that they can be tracked easily with the spreadsheet.
Create Reports for Your Expenses
Create reports for your expenses using the many tools which is available. You can create a report that details each expense from the most recent month so you know exactly what you spent in one click. You can also specify who you want to receive these reports, whether it be your spouse, best friend, or other person.
Final Words
In this article, the author helps to explain the process of creating a new expense or recording an existing one. Many small business owners are familiar with QuickBooks, a software used by businesses to keep track of financial information. This article discusses how to record a loan in QuickBooks.
FAQ’s
What is Loan
Loan is a payment you make to somebody else that uses their money to buy a good or service, then the lender gives you the money back at a later date.
What is a Paycheck Protection Program Loan
The Paycheck Protection Program is a credit-based loan available to employees of certain employers. It can help make your paycheck go further by lowering or eliminating the interest on card balances, or on loans taken out through us. We offer competitive rates and great customer service to help you succeed with this option.
What is a Conventional Loan
A conventional loan is a loan in which the lender receives interest payments on the loan and not payments on the principle. This type of loan is issued by a bank or other consumer credit institution when some borrowers have difficulty meeting their payment obligations. A conventional loan is often a loan made to buy, build, or improve real estate.
What is a Bridge Loan
A bridge loan is a short-term loan which could range from a few months to a few years. It’s caused by the need for cash during transition periods or from what people have viewed as money pits and a struggle to pay off.
What is the Principal of a Loan
A loan is an agreement under which one party (the lender) provides money to another (the borrower), expecting to be repaid with a predefined interest rate.
