Repaying a Loan

In Chapter 8, we talk about how you enter a loan for the business, so we won’t repeat it here. Eventually, however, you need to repay the loan. (You didn’t know that?) To record loan payments, you need to split each payment between two accounts: the interest expense account and the loan payable account.

Suppose that you make £75 monthly payments on a £5000 bank loan. Also suppose that the bank charges 1 percent interest each month. You have set up a loan account (of type Other Current Liability) in QuickBooks to track the loan principal repayments and you call it, creatively enough, Bank Loan. You note that QuickBooks already has an expense account called Interest Expense.

You can enter the loan repayment either using the Write Cheques window, by filling in the top part of the cheque as usual (described in Chapter 6), choosing the bank name in the Pay to the Order of field, and entering the total amount of the payment. In the Expenses tab: