Setting up an account for a loan made to a contractor out of business funds

Hi daisydays22. 

I'm happy to help, you'll want to do a few things, set up a liability account, record the money received from the loan and then record the payment. Follow along below. 

Step 1: Set up a liability account to record what you owe:

First, set up a liability account to record the loan:

1. Select Settings ⚙ and then Chart of Accounts.
2. Select New to create a new account.
3. From the Account Type ▼ dropdown menu, select Long Term Liabilities. Note: If you plan to pay off the loan by the end of the current fiscal year, select Other Current Liabilities instead.
4. From the Detail Type ▼ dropdown, select Notes Payable.
5. Give the account a relevant name, like "Loan for a car" or "Covid-19 relief loan."
6. Choose when you want to start tracking the money from the ▼ dropdown. Or learn more about opening balances:
   • Select Today if the account you're tracking is brand new as of today. In the Account Balance field, enter the balance in the account as of today.
     
     
      
   • If you started the account on another date, select Other. In the Select a date field, enter the date you want to start tracking money in the account in QuickBooks. In the Account Balance field, enter the balance of the account for the date you choose.
7. Enter the full loan amount as a negative amount. Since the future payments to the bank are a liability for your business, the amount should be negative.
8. Select Save and close.

Step 2: Record the money you got from the loan:

Now you have an account to track what you owe for the loan. If you plan to put your loan money directly into your bank account, create a journal entry.

1. Select + New.
2. Select Journal entry.
3. On the first line, select the liability account you just created from the Account dropdown. Enter the loan amount in the Credits column.
4. On the second line, select your bank account from the Account dropdown. Enter the same loan amount in the Debits column.
5. When you're done, select Save and close.

This puts the entire loan amount into your bank account. Whenever you record expenses or purchases, you can select your bank account as the payment account.

If you plan to use your loan in a different way, to make a direct purchase for example, we recommend you reach out to your accountant. This can get tricky and they know how to handle the next steps. Don't have an accountant? We can help you find one.

Note: To pay and amortize the debt of an intangible asset, see the Amortization schedule in QuickBooks Online.

Step 3: Record a loan payment:

1. Select + New.
2. Select Check. Or if you're in Business view, follow the steps to switch to Accountant view first. Then come back to these steps.
3. Add a check number if you send an actual check. If you use direct withdrawal of EFT, enter Debit or EF in the Check # field.
4. Enter the following information in the Category Details section.
   1. First line: Liability account for the loan and the amount of payment.
   2. Second Line: Expense account for the interest and the amount.
   3. Additional lines: Any additional fees along with the appropriate accounts.
5. Select Save and close.

If you have any other questions, feel free to post below. Thank you and have a nice afternoon