Banking

Thanks for reaching out, Sarita. We need to set up a liability account before paying for a line of credit in QuickBooks Online (QBO). I'd be happy to provide more information and assist you in setting this up.

A line of credit is an essential form of financing in businesses. It is typically treated as a liability account in QBO. Any amount borrowed from the line of credit is seen as a debt to the lender and is recorded as such in your books.

Here's how to create a liability account:

1. Go to the Transactions menu. Select Chart of Accounts.
2. Click New and enter a name for the account.
3. From the Account type dropdown, pick Other Current Liabilities.
4. Choose Line of Credit in the Detail type or Tax Form section dropdown. 
5. Hit Save.
   
   

If you incur interest charges, set up an expense account for it.

1. On the Chart of Accounts page. Click New.
2. Enter your preferred name in the Account name field.
3. From the Account type dropdown, pick Expense
4. Select Interest Paid in the Detail type or Tax Form section dropdown, then Save.
    

When you make a payment, you can track what you pay back to your bank or creditor. Either way, split the expense between principal and interest in the category details.

If you're going to send the bank or creditor a paper check, follow these steps:

1. Click + New, then Check.
2. In the Payee field, select or enter the bank's name.
3. Pick the financial institution in the Bank Account dropdown.
4. Select the Line of Credit in the Category field. Enter the amount of principal that you want to pay.
5. Choose the Interest Paid in the Category field if necessary. Type in the amount of interest you want to pay.
6. Once done, Save and close.

That's it! Your credit line payment has now been recorded. In such cases that you're paying the bank back with a debit or credit card, check out this article on how to handle this: Manage a line of credit in QBO.

For additional reference, I'm adding these articles to learn more about bills, expenses, and checks. These resources will also help you how to manage your transactions in QBO:

• Difference between bills, checks, and expenses.
• Categorize online bank transactions.
• Match online bank transactions.

Recording your line of credit in QBO is essential for accurate financial tracking and informed decision-making for your business. Feel free to consult your accountant to help you with the steps above. I want to ensure all your concerns will be addressed. Have a good one, Sarita!