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C
C Flatt
February 25, 2023
Question

equipment loan insurance

  • February 25, 2023
  • 1 reply
  • 0 views

I recently took out a loan for a piece of equipment. With the loan, I also purchased insurance to cover the loan payments if needed. The bank advances the insurance payment to the loan at the beginning of the month and my loan payment is in the middle of the month. Loan payment covers the insurance. I keep getting an error when I categorize the insurance advance as a bank fee ---- This account is set up as a liability account. To accept this transaction, either disconnect the account or change its category type to bank or credit card. -- How do I categorize this insurance charge?

1 reply

K
Kurt_M
February 25, 2023

Thanks for dropping by here today, @C Flatt. Let's work this out so you can manage loans inside your QuickBooks Online (QBO) company.

 

To handle the loan for a piece of equipment inside your company, know that you'll need to set up a liability account to track. I can input the process below to get you going. To begin, here's how:

 

  1. Access your QuickBooks Online company.
  2. On the top-right corner, click the Gear icon.
  3. Select Chart of Accounts, and then click New to create a new account.
  4. From the Account Type ▼ dropdown, select Long Term Liabilities. A reminder, if you plan to pay off the loan by the end of the current fiscal year, select Other Current Liabilities instead.
  5. From the Detail Type ▼ dropdown ▼ dropdown, select Notes Payable.
  6. Give the account a relevant name, like "Loan for a car" or "Covid-19 relief loan."
  7. Choose when you want to start tracking your finances. In the Balance field, enter the amount in the account, and determine the as of date. Enter today's date if you want to start tracking immediately.
  8. Select Save and Close.

For further guidelines, please see this article: Set up a loan in QuickBooks Online.

 

Now to account for the insurance to a loan, you'll want to contact your accountant. This way, they can provide you with the best way to handle these things and ensure your books are accurate.

 

In case you don't have an accountant, I can help you find one. You can check this page to find an expert that can help you handle your finances: Find a QuickBooks ProAdvisor.

 

Also, I've got you this article about modifying reports and adding extra details to it so you can monitor all aspects of your business: Customize reports in QuickBooks Online.

 

You can also check this page to keep your current report settings: Memorize reports in QuickBooks Online.

 

I'll be more than happy to have you here again if you have any additional QuickBooks-related concerns, @C Flatt. Stay safe, and have a nice day! 

C
C FlattAuthor
February 26, 2023

Thanks for the response. The loan is indeed set up as a liability, long term loan. My CPA says that the loan insurance is an expense that is added to the loan each month. When he or I try to expense it in a category or bank fees we keep getting this error --- This account is set up as a liability account. To accept this transaction, either disconnect the account or change its category type to bank or credit card.

 

I need to correct the the category, but QB continues to give the error. I'm missing something, just do not know what.

JaeAnnC
JaeAnnC
February 26, 2023

Thanks for getting back to us, C Flatt. 

 

Let me provide further details to categorize the insurance charge when setting up a loan in QuickBooks Online (QBO).

 

Since the insurance covers your loan payments, please follow these steps on how to record them:

 

  1. Go to + New and select Check.
  2. If you send an actual check, add a check number. If you utilize direct withdrawal or an EFT, enter Debit or EFT in the Check no. section.
  3. In the Category details section, select the liability account for the loan in the Category dropdown. Then, enter the payment amount.
  4. On the second line, choose the expense account for the interest from the Category dropdown and enter the interest amount.
  5. On the additional lines, add the insurance charge. If you haven't yet, create an expense account first to account for the charge. Once done, select the expense account from the Category dropdown.
  6. Select Save and close.

 

Additionally, you'll want to reconcile your accounts in QBO to ensure they match your real-life bank statements. This way, it guarantees that your books are balanced and accurate in particular ways.

 

If you have any follow-up questions about loans, please don't hesitate to reach out back to us. We'd be glad to help.

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