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matty5
August 14, 2023
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How to setup an expense for an office supply bought on a payment plan?

  • August 14, 2023
  • 2 replies
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Hello!

I've recently bought a computer (office supply expense) to use for my company. I bought the computer from Apple through Affirm who offers payment plan.

At the transaction time, I've paid the taxes and will be paying the rest in 12 equal payments. I'd like to have some input on how to set up that expense and reconcile the future payments that will come in, as well as the taxes I've already paid.

Thanks! 

Best answer by Rainflurry

@matty5 

 

The answer provided by @Mich_S is not entirely correct.  You do not want to assign an opening balance to the liability account.  That will be done when you assign the cost of the computer to the loan account when entering the bill.  

 

To properly record this, create a liability account called "Computer Loan" or something similar.  Also, make sure you have an appropriate fixed asset account called "Equipment" or "Computers".  What you call the fixed asset account is up to you.  

 

Then, when you enter the bill for the computer, assign the full cost of the computer (including tax) to the fixed asset account and enter the amount financed as a negative amount and assign that portion to the Computer Loan liability account.  If you financed 100% of it, the bill will net to zero and show as paid.  Then, when you make payments, assign the payment to the Computer Loan liability account.  That will reduce the loan amount.  If there is any interest, assign the interest portion of the payment to your interest expense account. 

2 replies

M
Mich_S
August 14, 2023

Good day, matty5. I want to share some tips about setting up expenses for an office supply bought using a payment plan.

 

First, create a liability account with an opening balance equivalent to the total amount of the supplies. This allows QuickBooks to keep track of the in and out transactions to this account. I'll show you how:

 

  1. Open the Accounting menu Chart of Accounts menu.
  2. Click on the New drop-down.
  3. Choose Liabilities from the top categories.
  4. Select or Add an account under the Save account under field.
  5. Fill out the Tax form section drop-down.
  6. Enter the Account name.
  7. Enter the Start date and opening balance.
  8. Once done, click on Save.

 

Note: It's advisable for you to reach out to your accountant if you're unsure of what accounts to use. They'll help keep your books in order as well.

 

 

Next, issue a bill with the total amount of the purchase. Here's how:

 

  1. Click the +New button and select Bill.
  2. Select the vendor name.
  3. Enter the bill details in the Category details section. From the Category dropdown, select the expense account you use to track expense transactions. Then enter a description.
  4. Select the customer's name.
  5. Add a second line for the taxes.
  6. Pick the customer's name.
  7. Enter the amounts.
  8. Fill out all other necessary information then click on Save and close.

 

Finally, record your partial bill payments for 12 months until the plan is completely paid.

 

I'll also add this extra guide on how to reconcile your account in QuickBooks Online.

 

Keep in touch so we can help you further with banking or QuickBooks. Stay safe.

    Rainflurry
    RainflurryAnswer
    August 15, 2023

    @matty5 

     

    The answer provided by @Mich_S is not entirely correct.  You do not want to assign an opening balance to the liability account.  That will be done when you assign the cost of the computer to the loan account when entering the bill.  

     

    To properly record this, create a liability account called "Computer Loan" or something similar.  Also, make sure you have an appropriate fixed asset account called "Equipment" or "Computers".  What you call the fixed asset account is up to you.  

     

    Then, when you enter the bill for the computer, assign the full cost of the computer (including tax) to the fixed asset account and enter the amount financed as a negative amount and assign that portion to the Computer Loan liability account.  If you financed 100% of it, the bill will net to zero and show as paid.  Then, when you make payments, assign the payment to the Computer Loan liability account.  That will reduce the loan amount.  If there is any interest, assign the interest portion of the payment to your interest expense account. 

      M
      matty5Author
      September 10, 2023

      Thank you so much @Rainflurry and @Mich_S for your answers, it solved my question! 🙂

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