If someone loans me money to pay for a business expense, how don I record this?

In QuickBooks Online (QBO), we can set up a liability account to record the loan and create a check to record the payments, @treasurechest. Here’s a step-by-step guide on how to manage your loan in QBO.

Any money or resources you receive temporarily to cover business expenses will be recorded as a liability. We need to set up a liability account to record the loan.

To do this, please follow these steps.

1. Go to the Gear icon, then select Chart of accounts.
2. Click New to create a new account.
3. Name the account.
4. Choose Other Current Liabilities if to be paid in full within one year. Select Long Term Liabilities if to be repaid in more than one year.
5. Leave the opening balance blank.
6. Add a description to add extra information about this account. (Optional)
7. Select Save.

Next, to apply the loan to the proper asset accounts, we need to create a journal entry. This effectively reduces the liability and ensures accurate tracking.

Here’s how to create a journal entry:

1. Select + New.
2. Under the Other column, select Journal entry.
3. Select the liability account from the Account field. To remove or reduce the opening balance, enter the opening balance amount in the Debit column.
4. Select the Opening Balance Equity account. Enter the same amount from line 1 into the Credit column to balance the transaction in the Chart of accounts.
5. Enter information in the memo section to know why you made the journal entry.
6. Select Save and close.

When you make repayments to a family member, you can update your records in QBO to reflect these payments by creating a Check.

 Follow these steps to record each repayment:

1. Click + New.
2. Under the Vendors column, select Check.
3. Add a check number if you plan to send an actual check. If you use direct withdrawal or an EFT, enter Debit or EFT in the Check no. field.
4. In the Category details section, select the liability account for the loan from the Category dropdown. Then, enter the payment amount.
5. Hit Save and close.

For more details on how to record a loan in QBO, refer to this article: Set up a loan in QuickBooks Online.

Additionally, you can use this article to learn how to record depreciation after setting up your assets in QBO: Depreciate assets in QuickBooks Online.

Furthermore, I recommend seeking advice from an accounting professional or you check out our  QuickBooks Live Expert Assisted service to ensure that the method you choose adheres to your specific needs and complies with accounting standards.

Your commitment to keeping precise records is commendable—it’s a hallmark of responsible business management. If you have any questions or need further assistance in recording your loan, I’m here to support you every step of the way. You’ve got this, and I’m happy to help.

@treasurechestcompany 

Yikes!  The response by @EvethC is wildly inaccurate.  If you follow those instructions, you will record equity you don't have, a negative liability value twice the loan amount, and no expense. 

The best way to handle this IMO is to create a liability account called "Loan Payable to (Name of Family Member)".  Then, create a $0 expense transaction (New > Expense) for the vendor where the business expense was paid.  On line 1, enter the expense account (category) as a positive amount.  On line 2, enter the newly-created "Loan Payable to (Name of Family Member)" as a negative amount.  That records the business expense and a corresponding amount to the loan payable liability account.  When you repay the family member, assign the loan payable account to the payment(s).