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How to Record a Loan Deposit in QuickBooks

Organizations take loans so that they can support capital

Organizations take loans so that they can support capital investment for building new premises, obtaining equipment, or commencing product development and research. When the company receives the loan amount, it is certain that they record a loan in QuickBooks as a liability in the accounts and keep track of each loan taken along with the return done to reduce the liability. Using QuickBooks as your accounting application, you can quickly set up a liability account for both short-term and long-term loans.  

How to Record a Loan Deposit in QuickBooks Desktop? 

Cash and non-cash asset loans like vehicles and office equipment are called liabilities for your company. QuickBooks allows you to track the amount of the loan and record your payments so you can remain at the top of it. Follow the steps below to record a loan deposit in QuickBooks: 

Note: These steps can be followed for both QuickBooks Desktop Windows and Mac.

Step 1: Set up a liability account

When you record a loan in QuickBooks, then you’re required to select a liability account for it. Follow the steps below to set up a liability account for your loan: 

  • First, navigate to the Lists menu, then choose the Chart of Accounts. 
  • Now, right-click anywhere, then choose the New option. 
  • Then, choose Other Account Types, then choose the correct account type for your loan: 

Other Current Liability: Utilize this for short-term loans payable over one year. 

Long-Term Liability: Utilize this for long-term loans payable over a longer period. 

  • After this, choose the Continue. 
  • Fill in the name and number of the account. 
  • Lastly, click on the Save & Close option. 

Step 2: Set up the vendor (Bank/lending company)

Make a new vendor for the bank or company you need to pay for the loan. 

  • First, navigate to the Vendors menu, then choose Vendor Center. 
  • Now, choose New Vendor. 
  • Then, enter the name of the bank or the company which you want to pay for the loan. 
  • Fill in other vendor information, such as phone number and email address. (optional)
  • Lastly, choose OK 

Step 3: Set up an expense account

Make an expense account so you can track interest payments or fees. 

  • First, navigate to the Lists menu, then choose the Chart of Accounts. 
  • Now, right-click anywhere, then choose New. 
  • Then, choose Expense, then continue. 
  • Enter the name of the account for the interest payments or fees. 
  • Lastly, choose the Save & Close option.  

Step 4: Record the loan amount

Now that you have set up a liability account for the loan follow the steps below to record the loan amount. 

Cash Loans

  • Navigate to the Banking menu, then choose Make Deposits. 
  • Now, choose Cancel if the  Payments to Deposit window opens. 
  • Then, in the Make Deposits window: 
How to Record a Loan Deposit in QuickBooks
  • In the Deposit To field, choose the account into which to deposit the loan. 
  • Verify the date and enter an optional Memo. 
  • Now, in the From Account section, choose the Liability account you made in Step 1. 
  • Then, in the Amount section, enter the loan amount. 
  • Lastly, select the Save & Close option. 

Non-cash loans

Create an asset account

  • Navigate to the Lists menu, then choose Charts of Accounts. 
  • Now, right-click anywhere, then choose New. 
  • Choose the type of account for your non-cash loan: 
  • Fixed Asset: Utilize this for items which have helpful value for more than a year (vehicles, buildings, and so on) 
  • Other Current Asset: Utilize this for items that have a value that can be converted to cash (like prepaid expenses) 
  • Other Asset: Utilize this for items that are neither Fixed Assets nor Other Current Assets. 
  • Choose to Continue
  • Enter the number and name of the account. 
  • Lastly, select Save & Close.  

Enter a journal entry

How to Record a Loan Deposit in QuickBooks
  • Navigate to the Company menu, then choose Make General Journal Entries. 
  • Now, fill in the Date and journal Entry No. 
  • Then, choose the first line and debit the loan asset account. 
  • Choose the second line and then credit the liability account. 
  • Lastly, choose the Save & Close option.  

Step 4: Record loan payments

Important Note:

  • QuickBooks note the payment for the principal amount as a deduction to the liability account. Once all the payments are completed, the value of the liability account will become zero. 
  • QuickBooks records the interest payments like a company expense. 
How to Record a Loan Deposit in QuickBooks
  • First, navigate to the Banking menu, then choose Write Checks. 
  • Now, select the Bank Account that you wish to utilize to pay the loan.
  • Then, confirm the Check No. And date. 
  • In the Pay to the Order section, choose the name of the bank. 
  • In the Expense tab: 
  • On the first line, choose the liability account you made in Step 1. Then, fill in the payment for the principal amount. 
  • On the second line, choose the interest expense account. Then, fill in the payment for the loan interest. 
  • Remember to check if you need QuickBooks to automatically fill out the payment at regular intervals (optional). 
  • Choose Memorize 
  • Enter the information as needed. 
  • Choose OK.
  • Lastly, select the Save & Close option. 

How to Record a Loan Receivable? 

We can begin by creating the Loan account. Follow the steps below to record loan receivable in QuickBooks desktop: 

  1. Navigate to Lists from the top menu, then Chart of Accounts. 
  2. Now, click on the Account button and press on the New option. 
  3. Choose the type according to the payment plan. 
  4. Other Current Asset: If the loan is planned for repayment over this year. 
  5. Other Asset: If the loan is supposed to be paid during the current year. 
  6. Click Continue to complete the information for the loan. 
  7. Attach a Description; however, it is a sub-account of another account. You also have the option to choose the Tax Line drop-down menu to select a tax form to link with the account. Enter any amount into the Opening Balance section and click OK. 

After making the account, you will have the option to record the loan payment. Follow the tapes below: 

  1. Navigate to the Banking tab from the top menu, then select Make Deposits. 
  2. Now, if the Payments to Deposit window appears, choose the payment you wish to link with the account. If the Make Deposits window appears, fill in the name of the customer who will pay off the loan in the Received From column. 
  3. Select the Asset Account that you created for the loan in the From Account section. 
  4. Then,  enter the customer’s patent in the Amount section. 
  5. Add the customer’s name once again in the Received From section. 
  6. Select the account you use to track interest income in the From Account section. 
  7. You can fill out any part of the payment that goes to interest in the Amount section. You can use the Interest Income account registered under the Other Income type unless you have a particular account to track interest for this loan. 
  8. Lastly, click on the Save & Close option. 

How to Record a Loan Deposit in QuickBooks Online? 

In QuickBooks Online, you have the option to create a liability account to record the loan and its payments. To learn how you can set up your liability account to track the loan follow the steps mentioned below:

Step 1: Set Up a Liability Account 

First, you’re required to create a liability account so you can record the loan. Follow the steps below: 

  1. Navigate to Settings, then choose the Chart of Accounts option. 
  2. Now, choose New to create a new account. 
  3. Then, in the Account Type drop-down menu, choose the Long Term Liabilities option, then choose Notes Payable from the Detail Type drop-down section. 
  4. Note: If you are thinking of paying off the loan at the end of the current fiscal year, choose Other Current Liabilities Account Type from the drop-down menu, then Loan Payable from the Detail Type drop-down menu. 
  5. Lastly, provide the account with an appropriate name, like a loan for a car. 

Step 2: Determine the loan balance

A new loan will display the full balance to be paid back. If the money from the loan has been deposited into your bank account: 

  1. First, leave the Opening Balance at $0 and choose Save. 
  2. Now, establish the beginning balance by categorizing the bank deposit in your liability account. 

An earlier loan added to QuickBooks Online was not totally paid back, so it should be set to the current payoff balance. 

  1. In the Opening Balance menu, select the date from which you wish to start tracking your finances. 
  2. Now, enter the account balance for that date. 
  3. Lastly, click on the Save option. 

Note: The beginning balance will be posted to Opening Balance Equity, which will balance the transaction in the chart of accounts. You add a balance once in the liability account during step 2, and then your bank feeds display the deposited loan amount; you’re required to make a second journal entry when you record the Deposit. 

Note: The opening balance entry in the liability account made the first journal entry in the account’s register. Follow the steps below to create a journal entry: 

  • First, choose + New. 
  • Now, choose Journal entry. 
  • Then, select the liability account in the Account section. To remove or reduce the opening balance, enter the opening balance amount in the Debit column. 
  • Choose the Opening Balance Equity account. Then, enter the exact amount from line 1 into the Credit column to balance the transactions in the account chart. 

Confirm the amounts. You need to have a similar amount in the Credit column on one line and the Debit column on the other. This will show the accounts are balanced. 

  • Enter the details in the memo field so you will remember why you made the journal entry. 
  • Lastly, click on the Save and Close button. 

Step 3: Record a loan repayment

When you’re all set to return the loan, follow the steps mentioned below to record each repayment. 

  • First, choose + New. 
  • Now, choose the Check option. 
  • Add a check number if you want to send an actual check. If you utilize direct withdrawal or an EFT, enter the Debit or EFT in the Check no. field. 

Now enter the following in the Category details field of the Check: 

  • On the first line, select the liability account for the loan from the category drop-down menu. Then, enter the payment amount. 
  • On the second line, select the expense account for the interest from the Category drop-down menu. Then, enter the interest amount. 
  • Add any additional fees on the additional lines. Choose the relevant accounts from the Category drop-down menu. 
  • Lastly, click on the Save and Close option.  

It’s crucial to record loan deposits at regular intervals to ensure that the company’s accounts are up-to-date at the end of each fiscal period.  

By : July 2, 2024
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