A business loan is not income. It’s a liability that you’ll repay over time.
Here’s how to record it correctly:
- Create a loan liability account.
Set up a Long Term Liability or Other Current Liability account (depending on the loan terms).
- Record the loan deposit.
When the loan funds are deposited into your bank account, categorize the deposit to the loan liability account, not income.
- Record your loan payments correctly.
Each payment includes:
- Principal, which reduces the loan balance
- Interest, which is recorded as an interest expense
- Reconcile your loan account regularly.
Compare your QuickBooks loan balance to your lender’s statements to ensure they match.
- Keep all loan documents.
Save your loan agreement, payment schedule, and monthly statements for your records.
Recording business loans correctly helps keep your Balance Sheet accurate, your financial reports reliable, and your books tax ready.
Need help cleaning up your books or reviewing your QuickBooks? Book a call with The Small Business Accounting Solution at https://www.tsbas.com/
About TSBAS:
At The Small Business Accounting Solution, we’re dedicated to helping business owners put profit first, so you can focus on what you love. With locations in Connecticut, Pennsylvania, and Massachusetts, we offer a full range of accounting services for business owners, executives, and independent professionals nationwide. While we proudly serve our local communities, we work with 98% of our clients virtually, providing the flexibility and convenience that modern businesses need.