How to Record Vehicle Loan in QuickBooks Desktop and Online?

Recording the vehicle loans in QuickBooks helps businesses track debts, interest costs, and asset values over time.

A vehicle loan is the amount of money borrowed to buy a vehicle,such as a truck, car or motorcycle.

Vehicle loans are marked as “liability” under the company’s balance sheet.

Terms of Payment

• Loan Amount: It refers to the principal amount borrowed to purchase the vehicle.
• Interest Rate: It refers to the cost of borrowing the loan amount.
• Long Term: It refers to the time duration over which the load is likely to be repaid.
• Down Payment: It refers to the initial payment made while purchasing.
• Monthly Payments: It refers to the regular payments made to the lender, including principal and interest.

How to Record Vehicle Loan in QuickBooks Desktop?

To record a vehicle loan in QuickBooks Desktop, set up a loan account and vendor, then create an expense account. Record the purchase with a journal entry, and log interest payments via Write Checks.

Part 1: Setup the account

To set up a loan account in QuickBooks Desktop, go to Lists > Chart of Accounts > New Account. Choose the type (Fixed Asset, Other Current Asset, or Other Asset), name the account, and save.

Step 1: Create a Loan Account

1. Click on the Lists menu on the screen.
2. Now, select the Chart of Accounts.
3. Click on the Account button and hit New.
4. Select the Account Type for non-cash loans:
5. Fixed asset: For the items that have value for more than a year.
6. Other Current Asset: For the items with value that can be converted to cash.
7. Other Asset: For the items that are neither Fixed Assets nor other Current Assets.
8. Press on Continue.
9. Mention the account name (e.g., Vehicle Loan ) and number of the account.
10. Click on Save & Close once you’re done.

Step 2: Create a vendor

1. Click on the Vendors menu on the screen.
2. Choose the Vendor Center.
3. Press on the New Vendor button.
4. Mention the name of the bank or the company.
5. Click on OK.

Step 3: Create an Expense account

1. Click on the List menu.
2. Choose a Chart of Accounts.
3. Click on New.
4. Choose Expense, and then hit on Continue.
5. Put the account name ( e.g., Loan Interest Expense )
6. Click on Save & Close.

Part 2: Record purchase of Vehicle

To record a vehicle purchase in QuickBooks Desktop, go to “Make General Journal Entries,” enter the date, debit the loan asset account, credit the liability account, then save and close.

Step 1: Navigate to the Journal entry column

1. Click on the Company name.
2. Choose the “Make General Journal Entries.”

Step 2: Enter the transaction

1. Put the Date and journal Entry No.
2. Select the first line and debit the loan asset account.
3. Choose the second line and credit the liability account.

Step 3: Save the transaction

1. Once you are satisfied, Click on Save and close

Part 3: Record the Interest amount

To record loan interest in QuickBooks Desktop, go to “Write Checks” under Banking, select the bank account, enter the principal and interest amounts in their respective accounts, then save and close.

Step 1: Locate to Write Checks

1. Click on the Banking menu.
2. Now, choose Write Checks.

Step 2: Enter the details in a bank account

1. Select the bank account [ which you will use to pay the loan ].
2. Verify the Date and Check no.
3. Choose the name of the bank in the Pay to the Order of field.
4. In the Expenses tab, enter the Loan account in the Account column and the principal portion of the payment in the Amount column.
5. On the next line, enter the Interest Expense account and the interest portion of the payment in the Amount column.

Step 3: Save the transaction

1. Once you are satisfied, Click on Save and close

How to Record Vehicle Loan in QuickBooks Online?

To record a vehicle loan in QuickBooks Online, create a liability account under Settings > Chart of Accounts. Then, record a journal entry by crediting the liability account and debiting your bank account. Save and close.

Part 1: Create a liability account

To create a liability account in QuickBooks Online, go to Settings > Chart of Accounts, select Long-term liabilities or Other Current Liabilities, choose Notes Payable, name the account, and save.

Step 1: Locate the Chart of Accounts

1. Click on the Settings menu on the screen.
2. Now, choose the Chart of Accounts.

Step 2: Select the Account details

1. In the Account type drop-down menu, choose the Long-term liabilities. [ Choose “Other Current Liabilities, if you plan to pay off the loan by the end of the fiscal year ]
2. Choose Notes Payable under the Detail Type drop-down.
3. Mention the account name (e.g., Vehicle loan)
4. Under the Balance field, decide when you want to start tracking your finances.
5. Put the amount in the account and determine the “as of” date.

Step 3: Save the transaction

1. Once you are satisfied, Click on Save and close

Part 2: Record the journal entry transaction

To record a journal entry for a vehicle loan in QuickBooks Online, go to + New > Journal Entry. Credit the liability account and debit your bank account with the loan amount, then save.

Step 1: Navigate to Journal Entry

1. Click on the + New option on the screen.
2. Choose Journal Entry.

Step 2: Enter the transaction

1. Choose the liability account created on the first line and mention the amount borrowed in the Credits column.
2. Choose your bank account on the second line and put the same loan amount in the Debits column.

Step 3: Save the transaction

1. Once you are satisfied, Click on Save and close

Conclusion

By properly recording the vehicle loan, businesses can properly list the vehicle as an asset and the loan as a liability in this company’s records. This involves recording the related expenses, such as interest and depreciation.

This procedure ensures that the business follows accounting standards and provides a transparent view of the company’s financial records.