Be it sooner or later; your business will need to borrow funds at some point. And when that happens; you want to keep track of them along with details of the asset purchased using those funds.
In many ways, the process will be similar to how you keep track of your yields and expenditures.
Fortunately, with the use of the Business Accounting software of QuickBooks; it is possible to create a specific liability account (be it for a short tenure or a long one) to document and keep track. Moreover, it will also make keeping watch over loan repayment dates easier.
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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
Steps to Setup 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.