Entering a loan in QuickBooks is not a difficult task, but it is detailed. Entering a loan into QuickBooks takes a number of different steps and forgetting to do just one of them can leave you with an inaccurate balance sheet. You will have to know what kind of loan it is, such as current or long term. You will have to know what the opening balance is. You will have to know what the interest payment is going to be and make sure all of it is correct.
Step
Add the loan account to the chart of accounts in QuickBooks. Open up the chart of accounts by using the Lists tab on the top menu bar. Click "Ctrl" and "N" to create a new account. When the New Account window opens, look under the Assets and Liabilities section, click on "Loan" and click "Continue."
Step
Change the account type if necessary. The default account type for a loan is other current liability. If the loan you are entering is expected to be paid off within one year, the default type is fine. If this is a loan that will take longer than a year to repay, change the account type at the top of the page to long term liability.
Step
Enter all loan information. First, name the loan. Make sure it's a name that you can recognize at a glance. Use "Truck Loan" as opposed to "Loan Acct. #333." Second, enter the description of the purpose for the loan. Third, enter the account number or the number used on checks and other payment forms to identify this as your account. The tax-line mapping can be entered by your accountant later. If you use the "Enter Opening Balance" button, the payee is the finance company you will be making payments to and the amount of the opening balance is the amount that you financed.
Step
Create a new interest expense account for this loan. One of the most common mistakes in creating loans in QuickBooks is forgetting to establish the amount of interest being paid. This reduces the principle on the loan, making it seem as if the loan is paid off before it actually is. Use the information in the paperwork of the loan to determine how much of the monthly payment will be principle and how much will be interest.
Step
Separate the interest from the principle payment. For example, if you have purchased a $75,000 Hummer, the payments may be $2,000 a month. If the loan paperwork indicates that the monthly interest is going to total $500 of that $2,000, your payment is separated into $1,500 monthly for principle and $500 for interest.
Step
Write the first check for your payment by clicking on the "Write Checks" icon. The payee is the finance company. Go down to the Expenses tab on the lower half of the Write Checks screen. The account in the first column is the loan account you created and named earlier. That amount is $1,500. The second account used is the interest expense account you created and named earlier with $500 as the amount. Click "Save and Close."
Step
Check the Chart of Accounts. Open the "List" tab and click on "Chart of Accounts." The amount on the loan liability should now be reduced by the amount of principle paid down by the first payment. If it isn't, recheck the work and make sure you have followed each step exactly.
