How to Account for Loans and Lines of Credit

How to Create an Account for a Loan or Line of Credit:

1. On the left-side menu, click Accountant > Chart of Accounts.
2. At the top right, click the 'New Account' button.
3. For the Account type, select Liability and for the category select Loans Payable or Other Liabilities.
4. For the Account name, enter a name for the loan or line of credit.
5. Choose a currency.
6. Click 'Save'.

How to Account for a Loan or Line of Credit Received:

1. On the left-side menu, click Accountant > Journal Entries.
2. Add a deposit (or income transaction).
3. Select the Loan Account as the category.
4. Choose the bank account where the funds were deposited.
5. Enter the date, amount and description.
6. Click 'Save'.

How to Account for a Loan or Line of Credit Repayment:

1. On the left-side menu, click Accountant > Journal Entries.
2. Click the 'New Entry' button at the upper right corner.
3. Enter the date of the loan repayment at the top of the entry form.
4. In the first line of the entry: Select the 'Loan Payable' account (or the name of your specific loan account).
5. Enter the principal portion of the repayment as a debit (This reduces the outstanding loan balance.)
6. In the second line: Select the 'Interest Expense' account.
7. Enter the interest portion of the repayment as a debit (This records the cost of  borrowing money.)
8. In the third line: Select the "Business Bank Account" you used to make the payment.
9. Enter the total amount paid (principal + interest) as a credit (This reflects the cash leaving your account , Add a description or memo (e.g., “Monthly loan repayment  principal and interest”, Double-check that the total debits equal the total credits.
10. Click 'Save' to complete the journal entry.