Could you explain what the difference is between Interest Paid and Interest Expense in QBO? I have both of these items and they are both designated as expenses. Does it matter which one I use to record loan interest?
Hi - Your video is very helpful, Thank You! Have a question, I have my LOC transactions auto imported into QBO. The account type is "Credit Card" . I have my checking transactions imported as well. Both accounts are from the same bank. Both cash draws and payments are transferred between accounts. QBO will match transactions as transfers (both ways). With these payments recorded as a transfer, do I follow the steps from the video to categorize the payments (interest/principle)? Would it double count the payment on the LOC side? Finally, is my LOC account type set-up wrong? Many thanks!
Great question! While I completely understand the logic behind connecting the line of credit to the bank feed, I do not recommend doing so for the following reasons: 1) there are parts of line of credit transactions that do not actually hit your line of credit account, specifically interest payments. By having this set up in the bank feed, all transactions are hitting this account and that is not correct. 2) When the bank feed records line of credit payments as transfers, you have no way to break out the interest other than with a separate journal entry, which is not only more work than necessary, but an advanced task that can lead to all kinds of messes if someone is not well-versed in accounting practices. Instead, I recommend recording your line of credit transactions from the checking account bank feed using the Categorize option so that you can use the Split feature to break out principal and interest. If you need additional assistance with this, I invite you to submit a support request to info@prosperitybookkeeping.net.
Great video. I've used my line of credit to directly pay for an expense invoice but it is not one of the options in the payment account dropdown when I go to record it. Is there a way to add it to them? Thanks.
Hi Terry, Great question! You can enter that using a journal entry. 1. Click the NEW+ button>Journal Entry. 2. Use the date you made the purchase. 3. In Line 1, enter the amount in the Debit column and choose the expense account (or asset account if it was a large purchase that has a useful life of greater than one year) 4. In Line 2, enter the amount in the Credit column and choose the line of credit account
Hi There - I left my LOC until the end of the year. I did not make deposits, I simply recorded everything via my checking account transactions and transferred.. I don't have the matching transactions. Is this ok? Also, I was wondering about reconciling
What about if we take more money out of the line of credit I just do another check deposit right I don’t need to add anything else in the chart of account again
What do you think would be the best way to do it with having the LOC connected to the banking feature? I’m thinking to exclude the income from the original advance because If not, it’ll double dip in the cash in.
Hi Brittany, It shouldn't double-dip into the income if you use the match feature in the bank feed. My recommendation would be to enter it from the bank account side (for example, record the deposit in the checking account and code it to the LOC account). Then when you go to the line of credit bank feed, it should see that transaction you entered as a match to the advance. Accepting the match will ensure that it connects that transaction to the original one without creating a duplicate. If you are not comfortable with that, then excluding the income is definitely a viable option. Thanks for the great question!
@@ProsperityBookkeeping yes I tried this. Since the advance and the transfer to the checking both come in as received, excluding is the only way I see around it.
Hello, thanks for sharing. Just want to check if this is interchangeable with a loans payable? Is this more appropriate to use the LOC account for bank loans? Thanks in advance.
Hi Rochelle, Thank you for your question. Loans payable are a bit different than a line of credit and may have a different procedure depending on the type of loan and where the loan funds went. I would not use these instructions for that type of loan.
Hello and thanks for sharing the video. It is very informative. I am currently starting a project on Quickbooks online. This project has 3-4 line of credits that are paid off a couple of years ago but still show either negative or positive balance instead of 0 balance. I want all line of credits to bring down to 0 balance. Can you please help me with this issue? I just don't know how to even start it. Any help will be useful to me.
You're welcome Nidhi! There is no simple answer for this; but, I see I have a voice message from you. I will give you a call and try to walk you through.
Thank you so much for sharing this LOC video. How can I reconcile a LOC when there are 5 checks {Paydowns) dated on 5/15/20 for 90,000 each but distributed each one of these payments on the month Jan, Feb, Mar, April and May. And then borrowing 300,000 in March? I appreciate your help
Hi Margie, thank you for your inquiry. It is difficult for me to answer your question without more context. If you would like an answer to this specific question, please submit a support request to info@prosperitybookkeeping.net.
Hi Jason, great question. Since a line of credit isn't a liability until you borrow against it, it doesn't get recorded anywhere until you borrow against it. Think of a line of credit like a credit card. If you have a $20,000 limit on your credit card, you don't record that anywhere. You only record the purchases you've made and the payments made against those purchases. A line of credit works in a very similar way, except that, unlike a credit card where the money goes directly to vendor, funds from a line of credit usually get deposited into a business' checking account. Hopefully this answers your question. If not, feel free to contact us. Our contact info is at the end of the video.
Would it be incorrect to track a bank loan e.g. line of credit or mortgage in the bank feed section since it is connected to my bank account? I track credit cards in the bank feed section and it reconciles perfectly, but there is a disconnect for me when I try to do this with my HELOC. I'm so confused! :-(
Hi Cynthia, Thank you for the question! It can get a bit tricky to have a line of credit feeding in through the bank feed. One possible issue that can arise from this is duplicate entries. It may get entered once through the bank feed of the account that made a payment or received the draw and then, if not done correctly, could get entered again from the line of credit or loan bank feed. My best advice would be to not enter anything from the loan bank feed that isn't matched to the cash account transaction. If it's not matching up, there is a reason for it and it should be investigated. If you still have questions, do not hesitate to contact us directly so we can look more closely at your specific situation: prosperitybookkeeping.net/contact/
Thank you for your inquiry. It is difficult for me to answer your question without more context. If you would like an answer to this specific question, please submit a support request to info@prosperitybookkeeping.net.
Hi, we have a line of credit and it was not set up in QB as a LOC. I just recorded it as a regular deposit. Can I enter it now with the current balance of the loan?
Was the deposit recorded this year or in a year that has already had a tax return filed? It makes a difference in how I answer this. Also, what account did you use to record the deposit initially?
@@TameraWhavers It looks like this warrants a more direct conversation to get your question answered. Would you mind visiting our contact page at prosperitybookkeeping.net/contact/ and sending us an email and I will be happy to help you resolve your question.
When our accounts were set up, the LOC was set up as a liability with a $60,000 limit. So we pay it down to 0. Now they increased our limit to $90,000. We cannot figure out how to get the $60,000 to $90,000. Any suggestions?
Thank you for your question, Kendolyn. The only time a line of credit should hit your books is when you are actively borrowing from it or paying it down. You do not record it if you simply have $60,000 available but are not currently using it. For example, if you open a line of credit with a $60,000 limit, nothing gets recorded on your books at that time. Let's say a week later, you borrow $20,000 from the line. The entry is $20,000 credit to the liability account associated with your line, and $20,000 debit to the cash account that you deposit the funds to. Your balance sheet now shows that you owe $20,000 on your line of credit. When you make a payment of say, $5,000, to pay off part of the $20,000 you borrowed, you credit the cash account you paid out of $5,000 and debit the liability account associated with the line $5,000. Your balance sheet now says that you owe $15,000 to your line of credit. Since you are such a great customer, your bank has now increased your available credit from $60,000 to $90,000. Nothing gets recorded at this time. When you borrow from it again, you repeat these steps all over again. Does that help?
extremely vague. When you are going to create a video about something specific it would be real-world realistic. You should walk the viewer through the process as a real-time entry. Not just choose accounts that make no sense especially when you were explaining the making a line of credit interest-only payment where you quickly added another chart of accounts items without explaining what you did and where it went. I feel like you know the information but your skills in teaching that information are coming from someone who thinks the viewer is up to speed on QuickBooks. Remember, the viewer is looking for step by step method, and if they have one of the steps they can skip forward. You should be creating a line of credit chart of accounts item. Choosing a pre-existing company that makes no sense to be the line of credit bank we are going to use makes it a little confusing. Just create each item new as a step-by-step process to simplify the process for the viewer not for you.
Thank you for that honest feedback. You are right! I did make a lot of assumptions about the experience level of the viewer and I apologize for my lack of consideration. I will certainly keep this feedback in mind and try to break down future explanations to the most basic level for the benefit of my audience.
Extremely helpful video! Thank you!
My pleasure! Glad you found it helpful.
Very helpful (and brief lol), thank you!
My pleasure. I'm glad you found it useful.
Great video, thank you very much!
Thank you Cory! I am glad you found it helpful. Feel free to request any other videos you would like to see if you can't find them in our channel.
Thank you for this info. I subscribed to you
Thank you for subscribing and I love your screen name. Makes me realize I forgot to eat breakfast! Lol.
Thank you!
My pleasure!
Very helpful thanks! Is there a way to automate receivables (from specific customers) and automatically apply to a LOC?
Great question. I would need more detail to answer that for you. I am happy to assist if you can send an email to info@prosperitybookkeeping.net.
Could you explain what the difference is between Interest Paid and Interest Expense in QBO? I have both of these items and they are both designated as expenses. Does it matter which one I use to record loan interest?
Good question. They are both the same thing. I recommend using one or the other, but not both.
Hi - Your video is very helpful, Thank You! Have a question, I have my LOC transactions auto imported into QBO. The account type is "Credit Card" . I have my checking transactions imported as well. Both accounts are from the same bank. Both cash draws and payments are transferred between accounts. QBO will match transactions as transfers (both ways). With these payments recorded as a transfer, do I follow the steps from the video to categorize the payments (interest/principle)? Would it double count the payment on the LOC side? Finally, is my LOC account type set-up wrong?
Many thanks!
Great question! While I completely understand the logic behind connecting the line of credit to the bank feed, I do not recommend doing so for the following reasons: 1) there are parts of line of credit transactions that do not actually hit your line of credit account, specifically interest payments. By having this set up in the bank feed, all transactions are hitting this account and that is not correct. 2) When the bank feed records line of credit payments as transfers, you have no way to break out the interest other than with a separate journal entry, which is not only more work than necessary, but an advanced task that can lead to all kinds of messes if someone is not well-versed in accounting practices. Instead, I recommend recording your line of credit transactions from the checking account bank feed using the Categorize option so that you can use the Split feature to break out principal and interest. If you need additional assistance with this, I invite you to submit a support request to info@prosperitybookkeeping.net.
Thank you
It's our pleasure!
Thank you.
You're welcome!
Great video. I've used my line of credit to directly pay for an expense invoice but it is not one of the options in the payment account dropdown when I go to record it. Is there a way to add it to them? Thanks.
Hi Terry, Great question! You can enter that using a journal entry.
1. Click the NEW+ button>Journal Entry.
2. Use the date you made the purchase.
3. In Line 1, enter the amount in the Debit column and choose the expense account (or asset account if it was a large purchase that has a useful life of greater than one year)
4. In Line 2, enter the amount in the Credit column and choose the line of credit account
Hi There - I left my LOC until the end of the year. I did not make deposits, I simply recorded everything via my checking account transactions and transferred.. I don't have the matching transactions. Is this ok? Also, I was wondering about reconciling
What about if we take more money out of the line of credit
I just do another check deposit right I don’t need to add anything else in the chart of account again
What do you think would be the best way to do it with having the LOC connected to the banking feature? I’m thinking to exclude the income from the original advance because If not, it’ll double dip in the cash in.
Hi Brittany, It shouldn't double-dip into the income if you use the match feature in the bank feed. My recommendation would be to enter it from the bank account side (for example, record the deposit in the checking account and code it to the LOC account). Then when you go to the line of credit bank feed, it should see that transaction you entered as a match to the advance. Accepting the match will ensure that it connects that transaction to the original one without creating a duplicate. If you are not comfortable with that, then excluding the income is definitely a viable option. Thanks for the great question!
@@ProsperityBookkeeping yes I tried this. Since the advance and the transfer to the checking both come in as received, excluding is the only way I see around it.
Hello, thanks for sharing. Just want to check if this is interchangeable with a loans payable? Is this more appropriate to use the LOC account for bank loans? Thanks in advance.
Hi Rochelle, Thank you for your question. Loans payable are a bit different than a line of credit and may have a different procedure depending on the type of loan and where the loan funds went. I would not use these instructions for that type of loan.
Hello and thanks for sharing the video. It is very informative. I am currently starting a project on Quickbooks online. This project has 3-4 line of credits that are paid off a couple of years ago but still show either negative or positive balance instead of 0 balance. I want all line of credits to bring down to 0 balance. Can you please help me with this issue? I just don't know how to even start it. Any help will be useful to me.
You're welcome Nidhi! There is no simple answer for this; but, I see I have a voice message from you. I will give you a call and try to walk you through.
How do you record the interest expense when it is charged to the line of credit account?
Thank you so much for sharing this LOC video. How can I reconcile a LOC when there are 5 checks {Paydowns) dated on 5/15/20 for 90,000 each but distributed each one of these payments on the month Jan, Feb, Mar, April and May. And then borrowing 300,000 in March? I appreciate your help
Hi Margie, thank you for your inquiry. It is difficult for me to answer your question without more context. If you would like an answer to this specific question, please submit a support request to info@prosperitybookkeeping.net.
Is there a way to do this without putting this into the checking and tracking it separately? More like a loan I guess
Hi Jason, great question. Since a line of credit isn't a liability until you borrow against it, it doesn't get recorded anywhere until you borrow against it. Think of a line of credit like a credit card. If you have a $20,000 limit on your credit card, you don't record that anywhere. You only record the purchases you've made and the payments made against those purchases. A line of credit works in a very similar way, except that, unlike a credit card where the money goes directly to vendor, funds from a line of credit usually get deposited into a business' checking account. Hopefully this answers your question. If not, feel free to contact us. Our contact info is at the end of the video.
Would it be incorrect to track a bank loan e.g. line of credit or mortgage in the bank feed section since it is connected to my bank account? I track credit cards in the bank feed section and it reconciles perfectly, but there is a disconnect for me when I try to do this with my HELOC. I'm so confused! :-(
Hi Cynthia, Thank you for the question! It can get a bit tricky to have a line of credit feeding in through the bank feed. One possible issue that can arise from this is duplicate entries. It may get entered once through the bank feed of the account that made a payment or received the draw and then, if not done correctly, could get entered again from the line of credit or loan bank feed. My best advice would be to not enter anything from the loan bank feed that isn't matched to the cash account transaction. If it's not matching up, there is a reason for it and it should be investigated. If you still have questions, do not hesitate to contact us directly so we can look more closely at your specific situation: prosperitybookkeeping.net/contact/
@@ProsperityBookkeeping Thanks for the reply. It was getting too complicated so I disconnected the feed. I will follow up offline. Thanks!!
So, the 1st loan disbursement came from Tania's Nursery. Great. Got it.
I followed these exact steps for opening the LOC account, made the Bank Deposit, but the LOC is not showing on the balance sheet. Any idea why?
Thank you for your inquiry. It is difficult for me to answer your question without more context. If you would like an answer to this specific question, please submit a support request to info@prosperitybookkeeping.net.
Hi, we have a line of credit and it was not set up in QB as a LOC. I just recorded it as a regular deposit. Can I enter it now with the current balance of the loan?
I'm thinking if I do it the way you explain, it will increase my bank account in the amount of the balance owed.
Was the deposit recorded this year or in a year that has already had a tax return filed? It makes a difference in how I answer this. Also, what account did you use to record the deposit initially?
@@ProsperityBookkeeping It was recorded last year and I deposited it into our Regular Business checking account.
@@TameraWhavers It looks like this warrants a more direct conversation to get your question answered. Would you mind visiting our contact page at prosperitybookkeeping.net/contact/ and sending us an email and I will be happy to help you resolve your question.
@@ProsperityBookkeeping I tried submitting my question at the link above but I keep getting an error message.
When our accounts were set up, the LOC was set up as a liability with a $60,000 limit. So we pay it down to 0. Now they increased our limit to $90,000. We cannot figure out how to get the $60,000 to $90,000. Any suggestions?
Thank you for your question, Kendolyn. The only time a line of credit should hit your books is when you are actively borrowing from it or paying it down. You do not record it if you simply have $60,000 available but are not currently using it. For example, if you open a line of credit with a $60,000 limit, nothing gets recorded on your books at that time. Let's say a week later, you borrow $20,000 from the line. The entry is $20,000 credit to the liability account associated with your line, and $20,000 debit to the cash account that you deposit the funds to. Your balance sheet now shows that you owe $20,000 on your line of credit. When you make a payment of say, $5,000, to pay off part of the $20,000 you borrowed, you credit the cash account you paid out of $5,000 and debit the liability account associated with the line $5,000. Your balance sheet now says that you owe $15,000 to your line of credit. Since you are such a great customer, your bank has now increased your available credit from $60,000 to $90,000. Nothing gets recorded at this time. When you borrow from it again, you repeat these steps all over again. Does that help?
intro to lonnnnnngggg
extremely vague. When you are going to create a video about something specific it would be real-world realistic. You should walk the viewer through the process as a real-time entry. Not just choose accounts that make no sense especially when you were explaining the making a line of credit interest-only payment where you quickly added another chart of accounts items without explaining what you did and where it went. I feel like you know the information but your skills in teaching that information are coming from someone who thinks the viewer is up to speed on QuickBooks. Remember, the viewer is looking for step by step method, and if they have one of the steps they can skip forward. You should be creating a line of credit chart of accounts item. Choosing a pre-existing company that makes no sense to be the line of credit bank we are going to use makes it a little confusing. Just create each item new as a step-by-step process to simplify the process for the viewer not for you.
Thank you for that honest feedback. You are right! I did make a lot of assumptions about the experience level of the viewer and I apologize for my lack of consideration. I will certainly keep this feedback in mind and try to break down future explanations to the most basic level for the benefit of my audience.