How to Setup a Line of Credit in QuickBooks?

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Setup a Line of Credit in QuickBooks

Here learn how to setup a line of credit in QuickBooks and how its works. Why you need to setup a Line of credit in QuickBooks?

To understand this, first, you need to know why a business requires a line of credit.

Such type of loan revolves around a line of credit and is typically used by businesses to meet big expenses like payroll or to withdraw a large amount of cash, quickly.

In layman terms, a line of credit is typically referred to as a revolving account, which enables organizations and customers to loan/borrow a particular sum of money.

Why you Need to Setup a Line of Credit in QuickBooks?

For most businesses, a line of credit is nothing less than a lifeline, especially for small companies and enterprises. This is because, such type of loan promises instant funding, which is needed for payroll and other daily expenses management.

Additionally, by setting up a line of credit, you can also help your business to:

  • Boost business savings
  • Expense Management
  • Make cash flow easy
  • Use the money for important requirements
  • Shift credit funds into a different account
  • Documents interest charges
  • Documents payment of expenses with your particular credit

How to Setup a Line of Credit in QuickBooks?

In order to track and set up a line of credit, you are required to set up two individual accounts. While one account will be for the principal, the other one will be allocated for the expense account for the interest.

Setting up an Account for the Principle

Step 1: From the Settings ⚙, choose the Chart of Accounts
Step 2: Choose New
Step 3: Select the Account Type drop down and choose the option Current Liabilities
Step 4: Select the Detail Type drop down and choose the option Line of Credit
Step 5: Edit the account name (optional)
Step 6: Choose Save and Close option
Step 7: Choose Yes, after you check the transaction date twice

Setting up an Expense Account for the Interest

Step 1: Click the Setting ⚙, and then choose Chart of Accounts
Step 2: Choose New
Step 3: Click the Account Type drop down, and then choose Expenses
Step 4: Click the Detail Type drop down, and then choose the Interest Paid option
Step 5: Edit the account name (optional)
Step 6: Click Save and Close

How Line of Credit Works?

As per industry experts, a line of credit is similar to the loan processing approach in banks.

QuickBooks allows adding a credit to records, refunds, or vendor returns. While there are numerous ways to enter a line of credit in QuickBooks, the most simple and recommended method is Journal Entry.

Note: The payments related to a line of credit can also be tracked with QuickBooks online. The records related to credit card payments allow maintaining precise financial-based reports.

The benefits of QuickBooks for business are endless, and when it comes to acquiring credit, this is by far the best option.


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