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PSSLLC
July 7, 2023
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How to record Loan fees prepaid before deposit?

  • July 7, 2023
  • 1 reply
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Hello all!

 

I need help on how to record the bank fees and a security deposit that were deducted from our loan amount before they were deposited into our account.

 

In other words, let's say I received a loan for $100k.

They charged us loan fees of $5k.

They are holding a security deposit of $2k, which will be returned to me at the loan's end of term.

They deducted those fees and deposit from the loan and deposited $93k into my bank account.

 

I set up my loan as: Long Term Liability with Payable Note for the full amount of $100k (since that is what we need to repay). I did a journal entry into my checking account to match the deposit of $93k.

 

How do I account in quickbooks that I paid that $5k in bank fees and that they are holding the $2k deposit?

Thank you!

Best answer by Rainflurry

@PSSLLC 

 

1) The security deposit is considered a liability? Wouldn't it be an asset since it will be returned to me later?

 

Yes, it's an asset.

 

2) When I attempt to add the bank fee as an expense it is asking me to select which payment account it's coming out of? I don't see an option of selecting the loan, I only see my checking accounts and credit cards. What should I select?

 

The easiest way to record this is to create a bank deposit.  Assign $100K to your loan payable, -$5K to loan fees expense, and -$2K to your security deposit asset account.  That's it.

 

 

1 reply

J
JamesAndrewM
July 7, 2023

I'd be happy to provide you with the steps to help you record these transactions on your QuickBooks Online.

 

To record the bank fees and the security deposit in QuickBooks Online, you can follow these steps:

 

1. Create an Expense account for Bank Fees:

 

  1. Go to the Chart of Accounts by clicking the Gear icon and selecting Chart of Accounts.
  2. Click on the New button to create a new account.
  3. Choose the account type as Expense and name it something like "Bank Fees."
  4. Save the account.

 

2. Create a Current Liability account for Security Deposit:

 

  • Similarly, create a new account, but this time choose the account type as Other Current Liability.
  • Name the account something like "Security Deposit."

 

3. Record the Bank Fees:

 

  • Go to the + New icon and select Expense under the Vendors column.
  • Choose the appropriate vendor or leave it as "No vendor."
  • Select the Bank Fees account you created in Step 1.
  • Enter the amount of $5,000 as the expense.
  • Save the transaction.

 

4. Record the Security Deposit:

 

  • Again, go to the + New icon and select Expense under the Vendors column.
  • Choose the appropriate vendor or leave it as "No vendor."
  • Select the Security Deposit account you created in Step 2.
  • Enter the amount of $2,000 as the expense.
  • Save the transaction.

 

5. Match the Bank Deposit:

 

  1. Go to the Banking tab and select the account where the loan amount was deposited (checking account).
  2.  Find the bank deposit transaction of $93,000 and click on it to open it.
  3. At the bottom of the transaction details, click on the Find Match or Match button.
  4. Locate the expenses you recorded in Steps 3 and 4 and select them to match with the deposit.
  5. Ensure that the total matches the deposit amount ($93,000).
  6. Save and close the transaction.

 

By following these steps, you will have recorded the bank fees and security deposit separately in QuickBooks Online while matching them with the loan amount deposited into your bank account. It will provide an accurate representation of your financial transactions and liabilities.

 

I also recommend that you contact your accountant to ensure an accurate account.

 

You may visit these links to guide you on how to categorize your transactions and reconcile your account flawlessly:

 

 

For additional QuickBooks-related concerns, don't hesitate to post them here in the Community. We're always available and willing to lend a hand to your queries. Have a great day ahead.

    P
    PSSLLCAuthor
    July 7, 2023

    Thank you for your replay.

     

    Two questions:

     

    1) The security deposit is considered a liability? Wouldn't it be an asset since it will be returned to me later?

     

    2) When I attempt to add the bank fee as an expense it is asking me to select which payment account it's coming out of? I don't see an option of selecting the loan, I only see my checking accounts and credit cards. What should I select?

    MariaSoledadG
    MariaSoledadG
    July 7, 2023

    Let me guide you on properly recording your security deposit and the bank fee, PSSLLC.

     

    Generally, the security deposit can be defined as the money given to a landlord, lender, or seller of a home or apartment as proof of intent to move in. This can either be refundable or non-refundable, depending on the terms of the transactions. Since security deposits are generally not considered rental income, you'll want to record them as a liability. 

     

    However, I still recommend reaching out to your accountant on what specific account to use. They have more technical expertise and extensive knowledge about financial statements and how they affect each of your accounts.

     

    On the hand, if you have followed the first step provided by @JamesAndrewM above, on how to create an expense account for your bank fees, you should be able to view the account and have the option to select. May I know the name of the expense account you've created?

     

    Furthermore, QuickBooks Online (QBO), provides different types of reports that cater to different aspects of your business. You'll only have to customize them to make sure you'll get the information you need: Customize Reports In QuickBooks Online.

     

    Keep me posted if you have any questions when recording security deposits. I'll be sure to help.

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