How to Record Loan Payable in QuickBooks Desktop and Online?

Companies acquire loans to fund their fixed investments in order to procure machinery, land, and buildings, or begin new products and services research. When the company gets the loan amount, a record of the loan in QuickBooks is maintained, since it is a liability to the accounts.

QuickBooks always maintains a record of every loan taken too, since the return is done to reduce such liability. In case you are using QuickBooks accounting software for your business processes, it is possible to record loans payable with ease in QuickBooks.

Let us begin by understanding how to record loans payable in QuickBooks Desktop and Online.

How to Record Loan Payable in QuickBooks Desktop?

All kinds of non-cash and cash loans, like the ones used for office equipment or vehicles, are tagged as liabilities for the enterprise. QuickBooks enables you to record how much money was lent out along with your payments to make things easy for you.

Note: Such steps can be implemented for both QuickBooks Desktop Mac and Windows.

Step 1: Create a Liability Account

When a loan is recorded in QuickBooks Desktop, you need to select the liability account for it. To create a liability account for a loan in QuickBooks Desktop, you need to implement the steps given below:

Here are the steps stated below to create a liability account for your particular loan:

1. Navigate to the Lists menu.
2. Now select the Chart of Accounts option.
3. Now press anywhere and then select the New option.
4. Select the Other Account Type option. Then select Relevant Account Type for your loan.
   • Long-Term Liability: Access these long-term loans payable over an extended period.
   • Other Current Liability: Access these short-term loans that are payable over one year.
5. Press the Continue button. Now add the Account name and number.
6. Choose the Save and Close button.

Step 2: Set up a Vendor for the Bank or Lending Company

Create a new vendor for the company or bank for which you need to pay the loan. In order to set up a vendor for a lending company or bank in QuickBooks, follow the steps stated below in the given order:

1. Navigate to the Vendors field.
2. Now select the Vendor Center option.
3. Now select the New Vendor option.
4. Now add the name of the bank or the particular company you wish to pay the loan to.
5. Add the vendor information like email address, phone number, etc.
6. Once it is done, press the OK option.

Step 3: Create an Expense Account

Create an Expense account to enable you to record fees or interest payments. To create an expense account for fees or interest, you need to perform the steps given below in the following order:

1. Navigate to the Lists menu.
2. Now select the Chart of Accounts option.
3. Now press anywhere and select the New option. Select the Expense option and then press Continue.
4. Now add the account name for the fees or interest payments.
5. Select the button Save and Close.

Step 4: Record the Loan Amount

Now once you have your liability account for the particular loan, here are the steps you need to implement:

Cash Loans

For cash loans, perform the given steps:

1. First, you need to go to the Banking menu.
2. Now select the option, Make Deposits.
3. Now, in case the Payment to Deposit screen appears, select the Cancel option.

Make Deposits Window

In the screen for Make Deposits, perform the steps given below:

1. First, select the account where you need to deposit the loan from the Deposit to Field option.
2. Now confirm the Date and add an optional Memo.
3. Now, from the Account menu, select the Liability account you created. Next, from the Account menu, add the loan amount.
4. Select the Save and Close button.

Non-cash Loans

For non-cash loans, first you need to create an asset account:

1. You need to go to the Lists menu and then select the Chart of Accounts option.
2. Choose the New option by right-clicking anywhere.
3. Select the account (Other assets, fixed assets, other Current assets)for your particular non-cash loan:
   • Fixed Asset: This is for items that are useful for more than a year like buildings or vehicles.
   • Other Asset: This is for items that are not fixed assets or other current assets.
   • Other Current Asset: This is for items whose value can be transferred into cash like prepaid expenses
4. Next, you need to select the Continue option and add the account number and name. After you are content, press the Save and Close button.

Now you need to enter a Journal Entry for non-cash loans:

1. Go to the Company Menu
2. Now select the option, Make Journal Entries
3. Now add the Journal Entry and Date No.
4. Select the first line and then debit the loan asset account. Now select the second line and then credit the liability account.
5. Choose the Save and Close button.
6. Now record the loan payments.

Note: QuickBooks accepts the principal amount payment as a deduction to the particular liability account. After the payments are finished, the liability account value will turn zero. Not to mention, QuickBooks records the interest payments as company expenses.

What is the Alternative Option to Record a Loan Payment in QuickBooks Desktop?

Here are the actions stated below to record a loan payment in QuickBooks Desktop manually:

1. Go to the Banking menu.
2. Now select the Write Checks option.
3. Now select the Bank account you want to use to pay the particular loan.
4. Verify the Check Date and Number.
5. Now from the Pay to the Order menu, select the name of the bank.
6. In the Expense tab, choose the liability account from the first line and then add the payment for the principal amount. In the second line, select the interest expense account. Now add the payment for the loan interest.
7. Remember to see if you want QuickBooks to automatically add the payment at regular intervals.
8. Once you are content, click the Save and Close button.

How to Record Loan Payable in QuickBooks Online?

You can record a loan in QuickBooks Online along with the payments by creating a liability account. This particular account monitors what you owe.

1. Create a Liability Account to Record What you owe

Here are the steps to create a liability account to record what you owe:

1. Navigate to the Settings menu and select the Chart of Accounts option.
2. Choose the New option to create a new account.
3. From the dropdown menu of Account Type, choose Long-term Liabilities and then choose Notes Payable from the Detail type dropdown menu.
4. Add a suitable name for the account, for instance, Car Loan.

Note: Select the Other Current Liabilities Account Type option from the drop-down box if you want to pay off the loan at the end of the current fiscal year. As an alternative, select Loan Payable using the drop-down selection for Detail Type.

2. Determine the Loan Balance

Here are the steps to determine the loan balance:

Note: In case the loan money is added to your bank:

1. First, make sure the opening balance is at USD 0 and select the Save option
2. Now, create the beginning balance by classifying the bank deposit in your particular liability account.
3. Also, it is important to note that a prior loan that has been included in QuickBooks Online and was not paid in full was added to the present payoff balance.
4. First, from the Opening Balance menu, choose the date you want to start monitoring your finances.
5. Now, for the Date, add the account balance.
6. Now choose Save.

Note: The beginning balance will be added to the Opening Balance Equity. This will help to balance out the particular transactions in the Chart of Accounts.

In case you add up a balance in the liability account, and your bank feeds show the deposit loan amount, then you need to make a second journal entry while recording the deposit.

Here are the steps to create a Journal Entry:

1. First, choose the + New option.
2. Now select Journal entry.
3. Now select the liability account from the particular Account field. Now add the opening balance amount in the given Debit column to erase or lessen the opening balance.
4. Select the Opening Balance Equity. Now add the right balance in the Credit column to balance out the Chart of Accounts transactions. Also, ensure that the amounts are verified and are the same as in the Credit column and Debit column.
5. Add the needed information in the particular memo section so that you have an understanding of why the journal entry was created.
6. Now select the Save and Close button.

3. Record a Loan Repayment

When you are ready to pay back the loan, follow the instructions given below to record every repayment:

1. First, select the +New option.
2. Now choose the Check.
3. If you wish to send a real check, include a check number. If you use direct withdrawal or EFT, add the Debit in the Check number menu.

Now add the information given below in the Category description menu of the particular check:

1. In the first line, select the liability account from the particular loan from the given Category dropdown menu. Now add the payment amount.
2. In the second line, select the expense account for the Interest from the particular Category dropdown menu
3. Now add the interest amount.
4. Include any additional fees on the additional lines.
5. Select the related accounts from the Category dropdown menu.
6. Press the Save and Close button.

This means that the loan payable must be recorded at specific intervals so that all the company accounts at the end of the fiscal year are balanced.

We hope that after reading this article, all your queries regarding the topic of how to record loans payable in QuickBooks Desktop and Online is fixed. We have shared all the steps and points related to the topic If you any question and query related to loan payable recording then connect with Dancing Numbers Online team.

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Frequently Asked Questions

Q1: How are Loans Classified in QuickBooks?

Ans: QuickBooks Online splits loans into two categories, known as current liabilities and long-term liabilities. Current liabilities are short-term debts with a one-year payback period. These consist of short-term loans, invoices, postponed salaries, and payroll and sales taxes.

Q2: What Loan Information needs to be Added in QuickBooks?

Ans: To ensure complete financial record-keeping and analysis, accurately entering the loan details like principal amount, interest rate, and repayment terms into the QuickBooks accounting software is mandatory.

Q3: How to Change the Loan Balance in QuickBooks?

Ans: Changing the loan balance in QuickBooks includes reconciling inconsistencies, updating principal amounts, and aligning loan changes to maintain precise financial records.