Setting up loans and making repayments

Answer ID 11136   |    Published 27/09/2006 09:57 AM   |    Updated 09/12/2014 12:55 PM

This support note explains how to record the receipt of money derived from a loan and also how to record the loan repayments.

Here's what's involved:

1. Create a liability account for the loan.

2. Record a Receive Money transaction for the loan amount.

3. Record Spend Money transactions for the loan repayments.


Task 1 - Create a liability account for the loan

This task involves setting up a liability account which will represent the loan, in other words when the loan money is received it can be allocated to this account.

  1. Go to the Accounts command centre and click Accounts List.
  2. Click the Liability tab then click New. The Edit Accounts window is displayed.
  3. Choose Other Liability in the Account Type field as highlighted below (not applicable for BusinessBasics).
  4. Give the account a number which suits your accounts list and enter an Account Name of your choice. Image
  5. Click OK.

Task 2 - Record a Receive Money transaction for the loan amount

This task involves recording a Receive Money transaction to deposit the loan into the liability account created in the previous task.

  1. Go to the Banking command centre and click Receive Money. In BusinessBasics go to the Command Centres menu and choose Banking then choose Receive Money. The Receive Money window is displayed.
  2. In the Deposit to field, select the account where the loaned funds will be held (see image below).
  3. Enter the Date and the Amount Received (the loan value).
  4. In the Acct # column, select the liability account created in the previous task.
  5. In the Tax column , specify the N-T (No Tax/Not Reportable) tax code (see image below). Image
  6. Click Record.

Task 3 - Record Spend Money transactions for the loan repayments

This task represents the Spend Money transactions which will need to be recorded each time a loan repayment is made.

  1. Go to the Banking command centre and click Spend Money. In BusinessBasics go to the Command Centres menu and choose Banking then choose Spend Money. The Spend Money window is displayed.
  2. In the Pay from Account field, select the account you want to make the payment from.
  3. Enter the Date and the Amount of the payment.
  4. In the Acct # column, select the liability account created in Task 1.
  5. In the Tax column , specify the N-T (No Tax/Not Reportable) tax code. Image
  6. Click Record. As you record loan repayments, you will see the balance of the liability account reduce reflecting a reduction in that liability.

Tip: If your loan repayments are on a fixed schedule, save this spend money transaction as a recurring transaction.

 

Referring to the example Spend Money transaction above:

  • The fixed amount of the repayments in this example is $550.00, comprised of $500 allocated to the bank loan liability account (to repay the loan) and $50.00 allocated to the Bank Charges expense account (for interest accrued on the loan).
  • It is possible to reflect the Bank Interest and Charges in the liability account by means of the initial receive money transactions. Our support notes Hire purchase setup - GST cash basis and Hire purchase setup - GST accrual basis contain information on this.



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