Record a Loan Payment, Loan Receivable, and a Loan to an Employee in QuickBooks Desktop or Online

You can “record a loan payment in QuickBooks” by creating a liability account. Since a loan, both cash and non-cash asset is a liability, you can track both the amount as well as interest payments through the same or different accounts.

Good accounting software not only helps business owners to properly organize their financial data, but it also helps them make informed decisions about sales, inventory and reduces the chances of human error. In this article, you’ll discover more about the same.

Set up a Liability Account before You Enter Payment for a Loan in QuickBooks

If you want to rely on QuickBooks accounting software to track or record a loan and loan payments, you must create a liability account.

Create a Liability Account

Here’s how you can set up a liability account to track or record a loan payments on the QuickBooks desktop.

• Launch QuickBooks, and go to the Lists menu.
• Select Chart of Accounts.
• Click on New.
• Select the account type. Select:
  • Other Current Liability Account – if you’ve taken a short-term loan payable in one year.
  • Long Term Liability Account – if you’ve taken a long-term loan payable over more than a year.
• Click on Continue. Enter the name and number for this liability account.
• Click on Save and Close.

Create a Vendor Account

To make payments to the bank or company, you must create a vendor account by following the steps provided below.

• From the Vendors menu, click on Vendor Center.
• Click on New Vendor.
• Enter the Name of the vendor (bank or company name). You can enter the contact information of a vendor as well.
• Click on Ok.

Create an Expense Account

To track interest payments related to the loan, you must create an expense account by following the steps provided below:

• Go to the Lists menu, and select Chart of Accounts.
• Click on New.
• Select Expense, and hit continue.
• Enter account name.
• Click on Save and Close.

Now you’ve set up all the accounts required to record loan payments in QuickBooks Desktop.

How to Record a Loan Payment in QuickBooks Desktop?

In QuickBooks Desktop, you have two options to record a loans. You can record both cash and non-cash asset loans, but the steps to record each are different.

Record a Cash Loan in QuickBooks

To record a loan cash in QuickBooks, you can follow the steps provided below:

• Go to the Banking Menu.
• Click on Make Deposits.
• Select cancel if a new window titled Payments to Deposit opens.
• Enter relevant details in the Make Deposit window:
  • Select the account to deposit the loan into through the Deposit To field.
  • Select the Date, and type in a memo.
  • For From Account, select the liability account created for tracking the loan payment.
  • Enter the loan amount in the Amount column.
• Click on Save and Close.

Record a Non-Cash Asset Loan in QuickBooks

To record a non-cash asset loan in QuickBooks, follow the steps provided below:

Create a New Asset Account

• From the Lists menu, select Chart of Accounts.
• Right Click on a blank space, and select New.
• Select Type of Account:
  • Fixed Asset: If assets taken as loans have long-term value, then select this option.
  • Other Current Assets: Assets, the value of which can be converted into cash, should be recorded through this type of account.
  • Other Assets: If the item doesn’t meet the criteria for any of the two above account types, then select Other Assets.
• Click on Continue.
• Enter the name and number for this asset account.
• Click on Save and Close.

Enter Journal Entry

• From the company menu, click on Make General Journal Entries.
• Select the Date for the transaction.
• Put in the Entry No.
• On the first line, select the loan asset account and debit it.
• On the second line, select the liability account and credit it.
• Click on Save and Close.

By following these steps, you’ve recorded a loan payable in QuickBooks. Now, you can start making payments for the loan and record them in this accounting software.

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Another Method to Record a Loan Payment in QuickBooks Desktop?

In QuickBooks, you can manually enter loan payments or automate the process. Automation will be useful for users who make the same amount of payment at regular intervals. To record a loan payment on a QuickBooks desktop, follow the steps provided below:

• From the Banking menu, click on Write Checks.
• Click on the dropdown menu, and select the Bank Account through which you’ll pay the loan.
• Verify both Checks No. and Date.
• Select the name of the bank from the Pay to the Order of field.
• Go to the expense tab, and:
  • Select the liability account for loan repayment on the first line.
  • Select the interest expense account to record the interest amount on the second line.
• Click on Save and Close.

In QuickBooks Desktop, you have the option to memorize a check. Doing so will enable QuickBooks to automatically enter loan payments after regular intervals.

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How to Record a Loan Receivable in QuickBooks Desktop?

You can use loan receivables to:

• Record loans made to a customer
• Record a loan to an Employee
• Record a Loan to Another Company

You can record all of these transactions and track them accordingly; after all getting repayment and recording, it is essential. Users need to create an asset account, and then use it to record a loans payable in QuickBooks.

Create an Asset Account to Record Loan

• Go to the Lists menu.
• Select Chart of accounts.
• In the type field, select:
  • Other Current Assets – If the loan will be paid after one year.
  • Other Assets – If the loan will be paid in the current year.
• Hit Continue.
• Enter Account Name and Description.
• Select a Tax from the Tax Line dropdown menu.
• Enter the amount paid for the loan. Hit Ok.

Record Loan Payments

• Go to the Banking menu.
• Click on Make Deposits.
• Associate a payment through the Payments to Deposit window.
• Enter the name of the customer/company/employee who’s paying back the loan,
• Select the Asset Account you created by following the aforementioned steps.
• Enter the amount paid by the debtor.
• Enter the name of the debtor.
• Select the Interest Account created for recording interest received from loan repayment.
• Enter any additional fee received, and associate it with the right account.
• Hit Save and Close.

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How to Record a Loan to an Employee in QuickBooks Desktop?

To record a loans to an employee in QuickBooks, you can use advance payment. The steps to do so are provided below.

• From the left panel, select Accounting.
• Go to the Chart of Accounts tab, and click on New.
• In the Account Type, select Other Current Assets.
• In Detail Type, select Employee Cash Advances.
• Click on Save and Close

This is an easy way to record any loan or advanced payment to an employee, freelancer, or contractor of your company.

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How to Record a Loan in QuickBooks Online?

It is easier to record a loan payments in QuickBooks online in comparison to its desktop counterpart. The best way to go about this is to create a liability account. This account will monitor both the loan and its payments. The amount recorded will provide you with information on what you owe.

Set up a Liability Account for Tracking Loan Payments

Here’s how you can set up a liability account to record the loan and its payment:

• Click on Settings, and select Chart of Accounts.
• Click on New.
• Select the Account Type.
  • Loan Term Liabilities Account: If you plan to pay the loan throughout a fiscal year.
  • Other Current Liabilities Account: If you plan to make payments related to the loan at the end of the year.
• Select Notes Payable from the Details Type dropdown options.
• Enter a name for the account. Enter a descriptive name to easily recognize the account later on.
• Click on when you want to start tracking your finances. From the dropdown options, select:
  • Today: to begin tracking payments and transactions from the present day.
  • Other: to begin tracking on a particular day. Here, you’ll have to enter a date from which QB must start tracking the transactions in this account.
• Enter the balance of the account in the Amounts field.
• Enter the full amount for the loan. Make it a negative number because it’s a liability to your business.
• Click on Save and Close.

Now you have a liability account to track loan payments.

Record Loan Amount

Once you’ve created a liability account to track loan amounts and payments, it’s time to record the amount received through the loan. There are two particular ways you can do this.

Option 1: Put Loan Money into the Bank Account

If you’re planning to take the loan and put it into your bank account, then this will be the preferred option. Moreover, if you put the amount into a bank account connected to QuickBooks online, then the transactions related to the loan will automatically be downloaded and recorded. All you’ll have to do is match them when you reconcile statements at the end of a fiscal period.

To record a loan amount put directly into the bank account, follow the steps provided below.

• Go to New, and select Journal Entry.
• Select the liability account you created to record loan payments.
• Enter the full amount you’re going to put into the bank into the credits column.
• Move onto the second line, and select the bank account you’ll use to store your loan. Enter the loan amount into the debits column.
• Click on Save and Close.

Option 2: Use Loan Amount instead of Saving into a Bank

In case you’re planning to use the loan amount instead of putting it into your bank account, then you should get in touch with your accountant. This task is very complex and must not be undertaken by individuals who lack comprehensive accounting knowledge.

If you don’t have an accountant, you can get in touch with us, and we’ll help you find one.

Record a Loan Payment in QuickBooks Online

Now you’ve everything set up. All you need to do is make payments and record them into QB online. Here’s how you can do this:

• From New, click on Check.
• Enter a Check Number. If you’re going to use direct withdrawal, then enter the Debit or ETF in the Check number field.
  • From the Category dropdown menu, select the liability account for tracking loan payments.
  • Enter the loan payment amount.
  • Go to the second line, and from the Category dropdown menu, select the expense account to track interest on the loan.
  • Enter the interest amount for the loan.
  • Enter any additional fee on subsequent lines.
  • Click on Save and Close.

For each additional fee, you must select the correct account through the category menu. This way, all your payments, and transactions are mapped to the correct accounts. Now you’ve set up a loan account in QuickBooks online and can record payments accordingly. Once you’ve set up your accounts, it’s quite easy to record loan payments in QuickBooks.