What is a line of credit in QuickBooks?
A line of credit is referred to as a revolving account that permits organization & customers to borrow some amount of money. This money is used to replay in identical monthly interest till the loan is paid off. Moreover, customers can redraw these amounts. The line of credit acts as a lifeline for small business organization because it provides you instant funding that is required for payroll and in daily expenses management.
List the major advantages of a line of credit in QuickBooks?
- Boost savings & expense management
- Simplify cash flow
- Spent money on the requirement.
How to set up the line of credit in QuickBooks?
A line of credit can be tracked with two sets up accounts i.e. principal & interest account
Following are the steps to set up a principal account in QuickBooks:
- Locate setting and then hit Chart of Accounts
- Click on New option
- Find out the dropdown menu in the Account type section and choose current liabilities
- Discover dropdown menu listed with detail types, choose a Line of Credit
- You can rename the account name if wanted(optional )
- Hit Save & then close
- Check the transaction date and then select Yes.
An Expense account setup:
Below are the steps:
- Discover settings and then choose Chart of Accounts
- Choose new
- Find out expenses on the dropdown menu listed with account types
- Now choose interest paid from the detail type list displaying in the dropdown menu
- Rename the account on the requirement
- Hit save & close button.
How to track it?
The payments of a line of credit can monitored with the QuickBooks online. The records of credit card payments permit maintaining accurate financial-based reports. If you want to transfer credit funds into another account, you can do it. Whenever you have used your credit fund there will be some sort of interest that will be charged that you need to record in the dedicated expense account. After making a payment, you can even track the line of credit with the cheques and the steps are as follows:-
On receiving payment via cheque, you can record it by writing a cheque.
- Click on the “+” to add the new cheque
- Hit cheques which are located below the supplier option
- Fill the name in the payee field
- Choose the bank account associated with a credit card in the bank account field
- Under category options hit on Line of credit and fill the amount that you wish to pay down
- Now choose the interest paid presently the category field
- Save it
- Verify the date and hit on yes
- With Debit or Credit card.
How does it work?
Line of credit is almost identical to the process of bank loans i.e. it permits some amount of funds that can be used as per requirement. QuickBooks permits to enter a credit to records refunds or vendors returns. There are several methods to record LOC but the simplest one is a journey entry. You need to locate a company and to generate some general entries. And after that, fill the details like date of deposit, etc. Moreover, you can book the expenses in the future.
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We hope that this blog covered major details related to the setup of a line of credit in QuickBooks. If you still face any difficulty to perform any of the steps or to know more information regarding QuickBooks functional error. Contact the team at toll-free QuickBooks number +1800-816-6849 carrying years of experience. They will carefully address all your queries and provide you better assistance in a single call. If in case, you fail to reach through the call you can also drop an email with your query and do a live chat. Get an instant resolution.
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