In this article, you’ll learn how to record a loan payable in QuickBooks. Loan payable is a liability on your company and consists of the amount you’ve taken as debt but haven’t paid back.
You need to properly record the loan payables and interest paid against them. Several accounts can be used to record the loan amount, interest, and additional fee associated with them.
Create Liability Account to Record Loan Payable
In QuickBooks, you need to create a new liability account to record your loan payables. Through this account, you’ll record the loan amount and track the payments made towards it.
To create a liability account in QuickBooks, follow the steps provided below:
- Go to the Lists menu.
- Click on Chart of Accounts, and select New.
- Select appropriate liability account type to record your loan payable:
- Other Current Liability Account Type – for short term loans which are payable within one year.
- Long Term Liability Account Type – for long term loans which are payable over multiple financial periods.
- Hit Continue.
- Input a name and number for the liability account.
- Hit Save and Close.
Users can create an expenses account to track the interest payment on the loan. Any additional fee paid on the loan will require a separate account. Mapping transactions to the correct account type is necessary to organize your accounting data properly. Failure to do so will result in incorrect reports.
How to Record a Loan Payable in QuickBooks
Since you’ve created a liability account, you can use it to record and track loan payables. To do so, follow the steps provided below:
- From the Banking menu, select Make Deposit.
- Don’t enter any information in Payments to Deposit window. Simply cancel it.
- From the Deposit To field, select the account to deposit.
- Enter date, and type in a memo for the loan payable.
- Select the liability account to track the loan payment.
- Input the total loan payable amount.
- Click on Save and Close.
In QuickBooks, users can also track the payments made against these loans. To do so, you simply need to debit any amount you pay towards the loan in the liability account. An expense account can be used to track the interest payments made towards the loan. Further, a vendor account is useful to maintain records of the creditor.