Does your business have one or more lines of credit? Well, you certainly aren’t alone. Most businesses use at least some credit to fund their day-to-day operations. It’s important to keep track of your credit — a task that’s made easy thanks to Quickbooks.
Tracking a line of credit in Quickbooks is pretty much the same as tracking a credit card. In fact, you’ll actually create a new credit card account in Quickbooks. To do this, click the Gear-shaped icon > Chart of Accounts > New. From here, you should choose “Credit Card” for the type of account, followed by Next. You will then need to enter more information about the line of credit. Follow the instructions on screen while leaving the account balance blank (the account balance should start at $0). After entering the required information, click Finish.
Now if you want to record a line or credit that was extended to your business, you’ll need to follow a slightly difference process. This is done by clicking the plus-shaped icon (+), at which point you should double-check to make sure the “Deposit To” account is correct. Next, scroll down to the “Add New Deposit” section at the bottom and select the credit card account you just credit. Next, enter the amount that was deposited into your business’s bank account, followed by Save.
Of course, most lines of credit carry at least some type of interest. After all, this is how lenders earn their money. When they loan a business money, the business must repay the entire balance of the loan plus interest — at least in most cases. Business owners should record the interest charges associated with their line of credit to maintain proper books. This is done by clicking the plus-shaped icon > Expense > Credit Card, at which point you can choose the LOC credit card amount.
In the “Choose a Payee” field, you’ll need to choose the financial institution. In the “Account” drop-down list, choose the interest expense account that is associated with the line of credit interest, after which you can enter the amount of interest that was charged. When you are finished, click Save to complete the changes.
Keep in mind that Quickbooks doesn’t have a dedicated field to enter an approved credit limit. You can, however, enter the limit in the description field of the line of credit account, or you can include the limit in the account name.
Did this tutorial work for you? Let us know in the comments section below!