Loan Payments are an integral part of any company. It does not matter if you are lending the loan to complete customers’ payments or if a lending loan is a part of your business. Everything must be recorded for Audits.
Small and mid-sized businesses tend to use Quickbook where they can easily keep a track of their finances, audits, taxes, budgets, and payrolls and even mitigate future financial risks. Quickbooks is always good software to have on board because of its varied features.
It is important that all the loans given by the company are correctly fed in Quickbook which, as already discussed, helps to have a good hold on the finances of the company.
This though, is a task that many companies don’t know much about. They sometimes tend to wrongly fill the loan receivables or miss-out this process altogether.
This article will help you to understand the step-by-step process involved to Record a Loan Payment and Receivable in QuickBook.
Initiate a new Loan account
Step 1 – Firstly click on “Chart of Accounts”, then chose “account” available on the menu, and select an appropriate asset type for the account. In this step, you have to decide whether the loan repayment will be done within a year or it would take more than a year to get your loan back. Select “other current asset” for loans that will be paid this year or choose “other asset” if it will take more than one year in loan repayment.
Step 2 – Write up a description on the description box. The description can contain the loan type and other minute details about the loan like, whom it was given to, the return dates etc., To proceed further, go to the save and close button.
Make a new Loan Transaction
Step 1 – In the journal entry, record the loan amount. Use a check if you are lending cash as a loan.
Step 2 – Left click on “Journal Entry”, choose the date on which the loan was granted, choose the account under which the loan falls (debit), put the amount given under the debit column and give it a description then select “accounts receivable”. Select the amount of loan given under the “Credit” column and fill out the “Name” field. Proceed further and click on “Save”.
Left-click on the “Customer” icon present on the home screen, go to “Receive a Payment”, opt for a customer and find the “Total Credits” box. On the next step, click “Save”, after which it applies the loan to the customer’s account, as a receivable balance.
Step 3 – If you are loaning someone in cash, choose “Write Checks” on the Banking section present on the home page. Set the loan lending account and enter the date on which the loan was given to the customer. Fill the loan amount in the “Debit” column. After completing these, verify the customer’s name, address, and description of the lent loan. Select loan account on the end of the screen and after which, click on “Save & Close.”
Record Loan Payments
Step 1 – Segregate loan payments. Here you have to choose between two components, the first one is Payment on principal, and the other is Interest payment. Select and click the “Record Deposits” icon present in the Banking section of the home screen. Judge a proper account for loan payment and payment date.
Step 2 – On the box fill in the name of the customer, and their loan account and write a memo if required. Choose the method of payment and in cases where the payment is to be made in checks fill “check number”. After all, this is done, fill out the loan amount corresponding to the loan principal.
Step 3 – Select and click to enter a new line to deposit. Type the name of the customer, and their interest income account and fill in the amount to be paid for interest. Fill out all the left-out fields with the exact information which you entered on the first line.
We know, The process of recording a loan payment and receivables in QuickBook can be a little challenging, for sure, but we are always there to help you with everything accounting-related. To get more news and expert hands-on on everyting accounting and finance related don’t forget to check out our other posts. www.refrencepost.com
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