How to Record Loans in QuickBooks Online

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Index
0:30 Definition of income vs a loan
1:08 Mistakes Seth sees when he sees loan recordings
2:16 We need to always visualize the books on what's expected to be seen
3:23 Record whole payment as principal, interest separate
4:10 Using the example 100k loan, record it in bank deposit
4:54 Check your balance sheet before saving transaction
5:29 100k going into the bank
5:46 Loan payable shown on balance sheet 100k
6:28 Template to record the loan, to get entries done
8:00 Record the payment out of the bank account
8:45 Check balance sheet to check work
9:07 Record journal entry, copy Seth's template for journal entry
10:07 Check the balance sheet again
10:32 Check the transaction report
10:45 View how interest increases balance
11:09 Running the profit and loss, to doubled check everything is correct
This content is for information purposes only and should not be considered legal, accounting or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Nerd Enterprises, Inc. does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Nerd Enterprises, Inc. does not warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers and viewers should verify statements before relying on them.

[@heroicwhisper]

Great demo Seth on how to record a loan. Going forward I will record loans the same way for my bookkeeping clients.

[@jonathangula2785]

Thank you for sharing your insights! Helpful. Will check out your other videos as well.

[@nerdenterprises]

Thank you!

[@cathykohl9833]

Thanks so much for this!!!!! I reconciled my Line of credit account!!!

[@cmyocum]

Very helpful. Thank you!

[@Office-fi6bp]

Love it! Great explanation, thank you!

[@nerdenterprises]

Thank you!

[@daniellenelson7140]

Great video. Thanx for the Free Help.

[@nerdenterprises]

Thank you! You should see the lesson I did on this topic in my new course - Bulletproof Bookkeeping with QuickBooks Online --> new.nerdenterprises.com/store

[@bogwasi]

You are great tutor! Thanks

[@nerdenterprises]

Thank you!

[@SarahAhemd]

Thank you so much

[@kestralrider313]

Very helpful, this was exactly the video I was looking for to get past my first business loan entry. one question I had was whether it was important to create the journal entry "correction" for interest as a journal entry for each payment of if I could do a single end of year journal entry adjusting the entire year's interest with a single EOY journal entry?

[@nerdenterprises]

Thank you! You can do it monthly or yearly. The main difference is that during the year, your Interest Expense will be understated, and your Loan Payable will be understated. If you are analyzing monthly financials, you will be missing part of the picture until you make that yearend entry. And you might not care, but I always want to make people aware of all of the implications.

[@bonniesullivan2627]

I recently started doing some bookkeeping for a small business with lots of loans. The loans were never entered into quickkbooks just payments. I'm trying to clean things up a bit starting with january 2019. I am totally overwhelmed as where to begin. Any suggestions besides jumping off a cliff? lol

[@kelvinchin2806]

thank you

[@karenmcconomy1750]

Thanks for this video. I'm applying the coding you suggest within the bank feed for loan draws and payments, so I think the only thing I do outside of the feed is JE the interest.

[@nerdenterprises]

That is correct!

[@tanjarichter4603]

You are awesome!

[@financetips]

Brilliant method! Thank you for sharing :) Bit longer but shows a "Audit" History :)

[@nerdenterprises]

Thank you yes. That's why I prefer this method - because you can see the whole picture in one place.

[@financetips]

@@nerdenterprises I remember watching your meeting when you reviewed Clickup. I am slowly implementing it in my Practice. Good to bounce some of your ideas

[@blinkaccounts3290]

Please can you make a video of how to record loan that was giving out

[@slbourdon]

I've got a loan payment that is due WEEKLY. Same principle I guess? JE every week?

[@douglas18]

Transfer vs. Add? Your example is shown by manually adding the loan payment. If your loan payment is made through a checking account that is synced to QuickBooks Online so the transactions automatically show us in the bank feed, do you "Transfer" or "Add" the payment to the Loan's Liability account? Also, thanks! This is the best explanation and tutorial I have found on this topic.

[@nerdenterprises]

Hi Douglas. I prefer to add it. The bank feeds will want to show it as a transfer. I don't like the transfer transaction type in general because it limits the amount of information you can detail. Most people won't care, but I am a data junkie and I like having the option!

[@PlasteringSolutions]

Thanks so much for share all this knowledge, just a quick question all the videos are for people who pay the same amount every month so how ca I record the payment if i want to give more money every month

[@nerdenterprises]

You can change the total payment and any difference over the interest will go to reduce the principal on the loan.

[@bayareababe]

Where is the bookkeeping basics video you talked about? I’m so confused about assets and liabilities. I work for a NpO and dealing with multiple loans and paybacks. Help!

[@nerdenterprises]

Hi! Here's my latest Bookkeeping Basics article and video: nerdenterprises.com/bookkeeping-basics-with-quickbooks-online/

[@ruthm7482]

This video is great. I have one question though. How do I record a business loan origination fee? i.e. My boss borrowed 10,000. But the company only wired in $9,575.00 into his bank account, and so therefore they took out $475.00. Do I just initially put the loan amount in as $9,575.00?

[@nerdenterprises]

Hi Ruth. You would record the deposit with one line item for the whole $10,000 going to the loan payable. Then a second line item with -$475.00 going to Loan Fees (expense).

[@Shuntastreet]

Thank you, can you advise on how your would record a loan that you receive and dont start paying on it until like a year from the original deposit date. Are we accrued the interest that is accumulating?

[@nerdenterprises]

Yep. Just book the interest expense each month, then when you start paying it off, the payments will go to the liability account, while you keep accruing the interest until the loan is paid off.

[@Shuntastreet]

Nerd Enterprises, Inc. thank you !

[@jenrysdam]

Thanks for the great info. Do you have a video that shows how to enter a HUD statement for the purchase of a building? It gets confusing with wire transfers to closing companies, etc. Thanks!

[@nerdenterprises]

Here's a video on how to enter a HUD-1. It doesn't address your specific use case. All wires going to closing should get booked to an Escrow (Other Current Asset or you can even set it up as a bank account). When you see the credits on the HUD-1 in your journal entry you book those as credits to zero out the Escrow account: kzbin.info/www/bejne/gJOrhoFujtt5qLc

[@jenrysdam]

@@nerdenterprises Thanks so much! That's very helpful! So if I took 90,000 equity out of one LLC and used it to purchase another LLC, should I just take that as owner's distribution and then owner's contribution to move the money?

[@nerdenterprises]

@@jenrysdam That works. That part depends on the intention. It could also be booked as LLC 1's investment (Asset) in LLC 2. But if they are meant to be kept completely separate (other than the common owner) then yes.

[@jenrysdam]

@@nerdenterprises Thank you SO much! You are amazingly helpful!

[@nerdenterprises]

@@jenrysdam Thank you! I strive for that every day 🤓

[@AlondraLopez-wy1pr]

How would you record a loan where the loan balance (interest for the life of the loan is already included) is higher than what was deposited into the bank account?

[@nerdenterprises]

Either you have to extrapolate it and include it in the payments or book it all at once as a "fee."

[@dmfencing405]

I have entered the fixed asset with a blank original cost and blank depreciation as sub accounts since we just made the loan purchase. I followed this video to set up a new loan. Now the bank account shows a positive cash amount? How do I rectify to show the purchase of our new vehicle? Do I now enter an expense to the dealership and show vehicle, taxes, etc from the bank account?

[@nerdenterprises]

Hi! Sorry this wound up in Spam :) For the loan you simply record the deposit (when you receive the money in the bank) and book it to the loan account. If the loan was made in connection with a vehicle purchase then you need the bill of sale. Short answer is a journal entry: Debit $xxx.xx for the amount of the vehicle purchase. Credit $xxx.xx for the loan amount. In between there will be other debits for fees, and credits for any down payment etc...

[@crystalmuhr1521]

How would this look when entering the loan into QB online when the lender pays the vendor directly (so there is no transaction that runs through the company account) and then we make payments to lender semi annually?

[@nerdenterprises]

Hi! You would have to record this with a journal entry. I think I would need more information though to be able to explain what the journal entry would look like. If a Lender is paying your vendor, then the vendor sold you something, financed by a 3rd party who pays the vendor and then collects from yo semi-annually? I feel like I am missing something here and I don't want to give you the wrong answer!

[@lorihamm7740]

How would you record a Short term(30 day) loan that you make to a business from your business?

[@nerdenterprises]

Som from one of your businesses to another? I would just make it an inter-company loan. Asset on one company's books, and liability on the other.

[@akronsolomon4047]

I am looking for the loan manager as the desktop version where you set it and let it flow as to your amortization schedule. I am OK with the booking of the loan, but quick books is the only accounting package I have seen with the loan manager module.. so I was expecting it in this version.

[@nerdenterprises]

Not in the online version, and the other issue you're going to have is that the bank's calculation of the interest will never line up with yours. Best way is to book it according to the bank's calculation of the interest vs principle.

[@akronsolomon4047]

Only if the method of calculation is different, and additional payment is added to monthly payment such as savings, sinking funds ect,, but apart from that the schedule correspond with the banks amortization. Also late payments fees adjustments, where JV can fixed,, but would like to see an auto option and correct any difference..

[@nerdenterprises]

@@akronsolomon4047 Unless you compound the interest daily, the method will be different. Best thing to do is click that gear icon at the top right and submit feedback to Intuit.

[@YouTuber-zc5js]

Hi, Please help me with this, but my loan is different, I have monthly amount that does not include interest, instead interest is debited on the loan balance on the same day of main monthly payment. So I can't split it. How do I record just interest against the loan payable balance when it is not being directly debited from my Business account?

[@nerdenterprises]

Hi! In this case when the interest hits, you book a journal entry; Debit Interest Expense, Credit Loan Payable. Then you book your whole payment against the loan payable. I actually prefer to record them this way because you can see all of the activity running through the Loan Payable account.

[@habibali9115]

Sir, how to add a business loan (from a bank) like running finance in the quickbooks because it is considered as liability, please answer my question as soon as possible.

[@nerdenterprises]

Sorry for the delay. If you ever need fast help like this, the best way is to sign up for a paid session on my website. Meanwhile assuming the funds from the loan were deposited into your bank account, you record the deposit and in the details under "From Account" you would choose a Loan Payable (Liability) account (set it up if you haven't already).

[@skynrgsolar6562]

So basically every month I need to create a new Journal entry with a decreasing finance charge component. Is there a way to automate this process? I'm surprised QBP doesn't calculate this automatically based on loan details.

[@skynrgsolar6562]

*QBO

[@nerdenterprises]

You can set up a recurring journal entry. The problem is the amount is different every month. And even if you automated it, the banks compound interest daily, so it will never match. You would still need to go back and edit the entries to match the banks.

[@pennymisale8920]

Any advice on issues with creating a long term liability account, then also connecting the loan bank account and it causing double entries? We are considering un-syncing the bank account but not sure if that is the best route.

[@nerdenterprises]

Hi! It sounds like a lot of extra work. If it's a simple loan account then it should be easy enough to record your interest and payments once per month. I wouldn't bother connecting it in the bank feeds. If it's revolving in nature (then it's not long term) you can connect it in the bank feeds as a "Credit Card" and that works well.

[@pennymisale8920]

@@nerdenterprises Thank you so much another random question do you usually reconcile the long term liabilities accounts? I am trying to do this and it's never been done all year and I am not sure how to find the ending balance to start the rec.

[@nerdenterprises]

@@pennymisale8920 I do reconcile them. if it hasn't been done in years, you may need to plug the beginning balance to agree with the statements. Assuming it doesn't match, then the difference has to be interest expense. Get that beginning balance right, and then you should be able to reconcile the rest very easily.

[@pennymisale8920]

@@nerdenterprises Thank you so much. Disconnected the bank and trying to piece it all together. I have a question, if it is ONLY an interest payment or ONLY a payment to principal would you enter an expense for those or JE or both? Trying to match in banking as well and link things over to reconcile the loan account.

[@nerdenterprises]

@@pennymisale8920 I wouldn't do a JE, when you have money coming out of the bank for it. Record an Expense. If it's Interest Only then book it straight to Interest Expense.

[@wannabethejuan9290]

Do you know what is the difference if my company is actually giving the Loan ?

[@nerdenterprises]

The whole thing flips. Now you have an asset instead of a liability. And you have Interest Income instead of Interest Expense.

[@georgecharlesallen1519]

Question: A $90,000 loan that costs, say, $10,000 in interest. Beginning disbursement of cash to bank is $89,500 after finance cost. When tracking the balance the way you indicated, my balance does not follow the balance the loan company started with at $100,000. It's always off by $10,000. How do you account for that? Hope the question makes sense. Thanks!

[@nerdenterprises]

Sounds like you are putting the loan in for $90,000, when you should be putting it in for $100,000? The loan amount is the amount that you borrow, before deducting any fees etc...

[@georgecharlesallen1519]

@@nerdenterprises then the $100,000 loan in your example should have been put in as $100,000 + the total expected interest payment over the term of the loan?

[@nerdenterprises]

@@georgecharlesallen1519 If the true loan amount was $90K and the Interest charged on the loan is $10K, then you put $90k in as the amount borrowed, but you'll have to back into the rate to get the interest to total the $10K.

[@alejandrovazquez5114]

why the loan payment is not reflected on the profit and loss?

[@nerdenterprises]

The Interest expense is on the profit and loss. At #9:00 is where I show you how to record the interest. And at #11:09 I show you exactly where it is on the profit and loss.

[@mariojavierjimenezrosario5793]

Very smart of you. You urge people to use this method so they have to buy your template to calculate the interest manually and so enter the journal transaction. $27.00 for a template ANYONE can make? Gimme a break !!!

[@nerdenterprises]

This method is the right way to account for loans. As for the template.. go make it!

[@mariojavierjimenezrosario5793]

Nerd Enterprises, Inc. No need to make it. Someone else did it FOR FREE and explained how to do it. Knowledge is not a merchandise

[@nerdenterprises]

@@mariojavierjimenezrosario5793 Great. And to think all those years of college and then years of experience. I guess I should quit my job since knowledge is supposed to be free! I wonder who will pay my mortgage now :(

[@mariojavierjimenezrosario5793]

Nerd Enterprises, Inc. You are right, it's the best way to record loan and interest payment BUT what is not right is charge for a simple amortization table. Instead, show people who don't know how to do it

[@daviddelarosa4955]

helpful but you talk to much be simple and specific my small brain don't get it

[@nerdenterprises]

Thank you for sharing.

[@shoegum7362]

So much fluff

[@nerdenterprises]

So much free