by Intuit•15• Updated 2 days ago
Learn how to record your QuickBooks Line of Credit loan once the invoice has been funded.
To record the loan correctly in Quickbooks, you’ll need to create a liability account to receive the Line of Credit funds.
Note: We recommend you ask your accountant if you have questions about how to do this.
Step 1: Create a liability account to track Line of Credit loans
Create a liability account in the Chart of Accounts.
- Go to Settings
and select Chart of accounts (Take me there). - Select New, Account Type ▼and then Other Current Liabilities.
- In Detail Type ▼, select the detail type that best fits the transactions you want to track.
Tip: Customers who use Line of Credit generally choose Loan Payable as the detail type. - Give your new account a name. Use the detail type description to create a name that describes what you want to track. In this case, you could use Line of Credit Liability as an account name.
- Add a description.
- When you're done, select Save and Close.
Step 2: Receive Line of Credit funds after funding an Invoice
Once you fund an invoice and get the loan money, record the deposit in QuickBooks.
- If you have your bank account connected in QuickBooks Online
- Record an intercepted payment in QuickBooks Online
- If your customer pays the invoice outside QuickBooks
If your bank account is connected to QuickBooks
- Find the deposit in Banking. Check the bank account you use for Line of Credit funds. If the bank isn't connected, you can manually enter the bank deposit info.
- Select split transaction. In Category, select the liability account you created for the Line of Credit loan. Enter the original invoice amount.
- On the next line, select the expense account used to track Line of Credit fees. Enter the amount of the fee as a negative number. The deposit should be the same as the net amount deposited into the bank.
- Select Apply and confirm.
Record a payment QuickBooks automatically applies
If your customer pays the invoice within the first 30 days, QB Capital applies the payment to pay off your Line of Credit loan. This is known as an intercepted payment.
You won't get paid by your client like you normally would when the Line of Credit feature isn't used. To record the transaction, you'll need to do a few more things.
Note: If your customer pays through the payment link on their invoice (the counterpart portal), QuickBooks creates a linked payment transaction to Undeposited Funds. The invoice is marked as paid.
Step 1: Balance your Line of Credit payment
- Select +New.
- Select Journal Entry.
- In Account ▼, select the Liability account created to track Line of Credit loans. Enter the full amount received from the customer (full invoice amount) in Debit.
- On the next line, in Account ▼, select Undeposited Funds, and enter the full invoice amount in the Credit field. The entry should balance on both the debit and credit.
- Select Save and close.
Step 2: Clear the payment from your undeposited funds account
- Select +New.
- Select Bank Deposit.
- In Account ▼, select the bank account.
- In Date, enter the date when the payment was received.
- Find the payment and check the box.
- Find the journal entry for the same amount and check the box. The deposit should show $0.00.
- Select Save and close.
Your customer pays the invoice outside QuickBooks
Step 1: Record the invoice payment
Record the invoice payment like you would normally.
Step 2: Repay the loan within 30 days.
- Select + New and then Expense.
- In Category ▼, select the liability account created to track Line of Credit loans.
- In Amount, enter the total payment. The payment should match the invoice amount to pay the loan off.
- Check to make sure the date and bank account are correct.
- Select Save and close.
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FAQs
Record a QuickBooks Line of Credit loan in QuickBooks Online
- Go to Settings. ...
- Select New, Account Type ▼and then Other Current Liabilities.
- In Detail Type ▼, select the detail type that best fits the transactions you want to track. ...
- Give your new account a name. ...
- Add a description.
- When you're done, select Save and Close.
There are a few ways you can record the LOC in your books but the easiest may be with a journal entry. Go to Company, Make General Journal Entries. Enter the date the LOC was deposited into your bank account. Debit your bank account and Credit the LOC account for the total amount.
What type of account should a Line of Credit be in QuickBooks? ›
Set up a liability account for the principle
Enter a name in the Account name field. From the Account type ▼ dropdown, select Other Current Liabilities. From the Detail type ▼ dropdown, select Line of Credit.
How do you account for a Line of Credit? ›
A line of credit, does not appear on the books of the organization until money is borrowed. When money is borrowed, the amount is recorded as a loan in the liability section of the Statement of Financial Position along with the interest owed on the outstanding balance.
How do I add a Line of Credit account to QuickBooks Online? ›
Set up your liability and expense accounts
- Go to Settings. , then select Chart of accounts (Take me there).
- Select New.
- From the Account Type ▼ dropdown, select Current liabilities.
- From the Detail Type ▼ dropdown, select Line of Credit.
- (Optional) You can change the account name in the Name field.
- Select Save and Close.
In the Make Deposits window:
- In the Deposit To field, select the account to deposit the loan into.
- Check the Date and enter an optional Memo.
- In the From Account column, select the Liability account.
- In the Amount column, enter the loan amount.
- Select Save & Close.
The Nature of Borrowing: A line of credit is an amount of money that a business can borrow and use for its needs, but it must eventually repay this amount to the lender. Since it represents a future financial obligation, it is recorded as a liability on the company's balance sheet.
Is a line of credit a debt instrument? ›
Understanding Debt Instruments
Credit cards and lines of credit can be used to obtain capital. These revolving debt lines usually have a simple structure and only one lender. They are also not typically associated with a primary or secondary market for securitization.
Is a line of credit a debit or credit? ›
Understanding Lines of Credit (LOCs)
A line of credit is a credit product that banks and other financial institutions offer their customers. They are available for both personal customers and business clients. Like other credit products, customers must qualify to be approved for a line of credit.
What category is a line of credit? ›
A personal credit line is a form of revolving credit that operates much like a credit card: You can write checks or make card payments in any amount up to your borrowing limit, and make payments in variable amounts as long as you meet a monthly minimum requirement.
Lines of credit appear under liabilities on the balance sheet.
What type of asset is a line of credit? ›
An asset-based line of credit is a flexible business financing option secured by a company's existing assets, including accounts receivable (A/R), inventory, and possibly equipment.
What type of account is a credit line? ›
A line of credit is a type of credit account that works much like a credit card does. It allows a borrower to withdraw money and repay it over and over again as long as the account is open and in good standing. But how does a line of credit work?
Is line of credit account payable? ›
An accounts payable credit line is a financial arrangement that allows a business to access funds to pay its suppliers and vendors. It acts as a short-term source of financing and extends payables by 90 or 120 days.
Is a line of credit a loan? ›
A loan gives you a lump sum of money that you repay over a period of time. A line of credit lets you borrow money up to a limit, pay it back, and borrow again.
How do I post a Line of Credit in QuickBooks desktop? ›
Create a Line of Credit account in QuickBooks Desktop, navigate to the Chart of Accounts, select “+ New,” choose “Loan” and “Other Current Liability,” enter the account details, and save the transaction.
How to record credit transactions? ›
The first step is to determine the transaction and which accounts it will affect. The second step is recording in the particular accounts. Consideration must be taken when numbers are inputted into the debit and credit sections. Then, finally, the transaction is recorded in a document called a journal.
How do I record supplier credit in QuickBooks online? ›
Select + New. Select Supplier Credit. Enter in the Supplier, Date, Amount and any other relevant fields. Click Save and Close.
How to record a short-term loan in a balance sheet? ›
When a company borrows money from its bank and agrees to repay the loan amount within a year, the company will record the loan by increasing its cash and increasing a current liability such as Notes Payable or Loans Payable.
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