Liability accounts are used for the purpose of tracking financial loans made to a company or business. If you received a startup loan to help get your business off the ground, for instance, you’ll want to record it in Quickbooks as a liability account. Doing so will allow you to keep track of how much you owe on the loan, the respective interest rate, how many payments you’ve made, and more.
Steps To Setting Up a Liability Account:
- Launch Quickbooks
- Access the Lists menu > Chart of Accounts.
- Click the Account drop-down box at the bottom of the list and choose New.
- Choose Other Account Types.
- Click the drop-down arrow and choose either short-term loan (less than one year) or long-term loan (longer than one year).
- Click Continue.
- Enter the account name and number.
- Leave the account balance at $0.00.
- When you are finished click Save & Close to finish setting up your liability account.
- Congratulations, you’ve just successfully set up a liability account for the respective loan!
Now that you’ve set up a liability account, you might be wondering how to make/record payments on the loan. Quickbooks has a separate function designed specifically for this task — Loan Manager. In just a couple easy steps, you can make payments to any short or long-term loan recorded in your account. Now let’s take a closer look at the step-by-step process to making a loan payment in Quickbooks.
How To Make/Record a Loan Payment In Quickbooks
- Launch Quickbooks
- Access the Banking menu > Write Checks.
- In the Write Checks window, create a new check for the financial institution connecting to your loan (eg: whoever gave your business the name).
- Add the interest of the loan to an Interest Expense Account in the check details section. You can also assign the amount for principle to the liability account.
- Choose Memorize Check from the available options to save the changes. Note: you can schedule the loan repayment for a future time, or you can have Quickbooks instantly record it to your account.
- When you are finished, click Save & Close to finish setting up your liability account. If you need to record a second loan payment, choose Save & New.
Quickbooks makes handling loan repayments a breeze thanks to its Loan Manager. Some users may feel a little lost using this function at first, but you’ll quickly get the hang of it after recording a couple payments.