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Putting Long Term Liability Funds Into Checking
I recently purchased some equipment and I created the long term liability and interest accounts for the loan in my Chart of Accounts. How do I accurately take the funds from that account so that they transfer to my checking account where the funds were actually disbursed from? I’ve tried a transfer, but all that does is to increase the overall long term liability amount. Thanks for the help.
Keep Up Appearances,
When you first get the money from the loan your entry will be a Deposit to Checking from the Loan Liability account. Basically you’ll Debit your Checking account and Credit the Liability account for the amount of the Loan. Typically, your loaner charges you the interest each month on the unpaid balance so for the initial transaction you don’t have to record interest (even if they give you the total interest amount).
Now when you make your monthly loan payments you will create a Check for the amount of the payment and on the Expense Tab enter in your loan account and the PRINCIPAL amount then on the next line enter in your Interest Expense and the Interest amount.
Hope that helps!
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