Line of Credit – Bank Loans

Line of Credit – Bank Loans

Line of Credit – Bank Loans

When you are dealing with banks or financial institutions that give you a line of credit, there are a few things you must do in order to record it in Lizzy. Keep in mind, that this has nothing to do with units or financing them. This deals directly with taking a loan out of the bank and how to repay it.

1. Create a liability account as the money you are borrowing is a liability to the business (around the 260/270 account number range).

2. When you get the money (either a direct bank loan with one lump sum up front, or a line of credit you can draw money from) go into your checking account and create a new entry (either a deposit or an EFT inbound) to record you getting the money – be sure to hit your liability account in the breakdown. This puts a balance in that liability account and it is now recorded on your books.

3. When you make payments to the financial institution, go into checking and create a new check or EFT outbound to them and again hit this liability account , thus lowering the balance in the account.

Please note: If you already have this bank loan  and you are just getting started with lizzy, the beginning balance in the account will transpire via a GL adjustment as the bank balance you put in already includes those monies. Also, if you are paying the loan back, and you are being charged interest, when you record your loan payment, the net pay going to the financial institution is recorded on the check, but the breakdown would include your liability account for the principle you are paying, and also an expense account for the amount of the interest you are paying as well. These should add up to be the total on the checking entry.

 

 

 

 

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