Are you in the process of obtaining a business loan? Many entrepreneurs use loans to finance their businesses. Whether secured or unsecured, though, a loan is a financial liability that, like all liabilities, must be paid back. As a result, you’ll need to record it. Quickbooks makes it easy to record business loans. In just a few simple steps, you can set up a business loan in Quickbooks.
Create a Liability Account
To record a business loan in Quickbooks, you’ll need to create a liability account. You can create new liability accounts in Quickbooks Online by accessing the “Chart of Accountings” menu under “Settings.” Upon accessing the “Chart of Accounts,” click the drop-down menu for “Account Type” and select either “Long Term Liabilities” or “Other Current Liabilities. If it’s a long-term loan with a repayment period that’s greater than one year, choose the former option. If it’s a short-term loan with a shorter repayment period, choose the latter option.
You’ll also need to choose the “Detail Type” for the business loan. Under the “Detail Type” menu, select “Notes Payable,” followed by entering a name for the loan. Quickbooks allows you to enter a name for new loans, as well as other liabilities accounts, but it’s recommended that you use something descriptive. Choose a descriptive name that corresponds with the type of loan. Doing so will make it easier to identify and distinguish from other loans and liability accounts.
Create a Journal Entry
After creating a liability account for the business loan, you’ll need to create a journal entry. What’s the purpose of a journal entry? It will update your Quickbooks account with the new money. A loan is money. When you receive a loan, you’ll have to deposit it in one of your business’s bank accounts, which requires the use of a journal entry.
To create a journal entry, click the “+ New” link on the home screen and choose “Journal entry.” You can then select your recently created liability account from the “Account” menu. For the “Credits” field, enter the amount of the loan. For the “Account” menu, select the bank account into which you deposited the loan. You should also enter the loan amount in the “Debits” field. Click “Save and close” to finish setting up the journal entry. Your business loan should now be recorded in Quickbooks.
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