Basic Loan Accounts Setup

How do I add a Loan account and link income/expense accounts to it?

Occasionally a business may need to borrow money to fund capital investements e.g. purchase of equipment. When your company borrows money, you should record the loan as a liability in your accounts and track the loan deposit amount and each loan payment that you make to reduce the liability.

This is a 3 step process:

1. Setup a Liability (Loan) Account.
2. Setup an Other Income Account.
3. Setup an Other Expense Account.

• These accounts will be used to show the income and expenses to and from the loan.
• This income account will be used for withdrawing funds from the loan. Use this account to set the loan principal, and any time the amount owing needs to increase (i.e. Interest etc.)
• This expense account will be used for loan repayments (or to reduce the amount owing on the loan).

Step 1: Setup a Liability (Loan) account:

• Click on Chart toolbar option.

• Click on the Liabilities tab.
• Click on the Add button.
• Add your liability account details. (Account Type - Liability; GST Category - 11. Non- Reportable Receipts)
• Click OK button to save.

Note: If you are using Cashbook Platinum, the Reporting Group will most likely be either 8-810 or 8-850. If you are working within a consulting group, please check with them as to which reporting group you should use. This can have an affect on advanced budgets and reporting.

• Depending on which Chart template you chose on your initial setup of your company, there are already a number of different loan accounts already setup. These include: Commercial Bill, Fixed Term Loan, Variable Loan, Private Loan, both short term and long term liability accounts. If your current loan falls into one of these loan types, use the existing accounts. Alternatively, either Add a new account or Edit an existing unused account.

For example:

Step 2: Setup an Other Income Account.

• Still in Add to Chart of Accounts window.
• Click on the Add button.
• Add your Income account details. (Account Type - Other Income; GST Category - 11. Non- reportable Receipts; Balance Sheet Link - loan account created in Step 1)
• From the Balance Sheet Link drop down menu, select the Liability Account you have just created (eg. 852 - Fixed Term Loan LTL Account)
• Cliick OK button to save.

For example:

Step 3: Setup an Other Expense Account.

• Still in Chart.
• Click on the Add button.
• Add your expense account details. (Account Type - Other Expense; GST Category - 10. Non- Reportable Receipts; Balance Sheet Link - loan account created in Step 1)
• From the Balance Sheet Link drop down menu, select the Liability Account you have just created (eg. 852 - Fixed Term Loan LTL Account)
• Cliick OK button to save.

For example:

For information on how to record a loan income transaction click here.