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How to record loan payments as buyer if seller is carrying my loan?

Forum|Forum|4 years ago
March 2, 2022
2 replies
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Hello,

I have bought a small business where the previous owner is carrying the loan for me (seller financed).

I would like to know how I should record my monthly payments to them, via check.

QuickBooks Online

Best answer by Mark_R

I've got your back on recording loan payments in QuickBooks Online (QBO), @7innlodging.

You can write a check to record your loan payments. Here's how:

Sign in to your QBO account.
Click the + New button, then select Check.
In the Vendor drop-down, select the seller who's carrying your loan. Then, choose the bank account.
Go to the Category details section and select a liability account for your loan. If you haven't created a liability account yet, check out this link to create one.
Enter the necessary information.
Click Save and close.

Most importantly, I still recommend seeking help from your accountant on recording your loan payment. They can provide other options to take based on your recording practice and business needs.

As always, you can visit our QuickBooks Community help website if you need tips and related articles in the future.

Should you need further assistance recording loan payments. I'm available here to help any time, @7innlodging.

M

Mark_RAnswer

I've got your back on recording loan payments in QuickBooks Online (QBO), @7innlodging.

You can write a check to record your loan payments. Here's how:

Sign in to your QBO account.
Click the + New button, then select Check.
In the Vendor drop-down, select the seller who's carrying your loan. Then, choose the bank account.
Go to the Category details section and select a liability account for your loan. If you haven't created a liability account yet, check out this link to create one.
Enter the necessary information.
Click Save and close.

Most importantly, I still recommend seeking help from your accountant on recording your loan payment. They can provide other options to take based on your recording practice and business needs.

As always, you can visit our QuickBooks Community help website if you need tips and related articles in the future.

Should you need further assistance recording loan payments. I'm available here to help any time, @7innlodging.

7

7innlodgingAuthor

Thank you!

Rainflurry

@7innlodging

Make sure you have set up the seller's note as a note payable (liability) account in QB. Then, each month, when you write a check to the seller, assign the principal amount to the note payable and the interest amount to interest expense. This will reduce the note payable each month by the principal amount and book the interest expense.

B

Brivera83

I have the same situation , I created a long term liability account , and QuickBooks automatically created an opening balance equity account. Is that how is supposed to be?

G

GlinetteC

QuickBooks generates an opening balance equity account when you manually enter an opening balance to the liability account created, Brivera83.

It is normally used by QuickBooks as the default offsetting account when creating a liability account (or other accounts) and entering an opening balance. Depending on the situation, it's preferable not to enter an amount and instead record the loan account using another method, like a deposit or journal entry.

I would still recommend consulting with an accountant so they can advise other ways how to record the loan in QuickBooks Online. This is to ensure your books are accounted for properly.

You'll also want to check to manage default and special accounts in your Chart of accounts for additional reference and guidance.

Feel free to post again if you have other questions about managing your accounts. The Community is always here to assist.

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