How to Record a Loan in QuickBooks

Recording a loan in QuickBooks Desktop is one of the most common bookkeeping tasks small business owners get wrong. Done correctly, you set up a liability account to track what you owe, deposit the loan proceeds into your bank account, and split each payment into principal and interest. Done incorrectly, your balance sheet shows inflated income or your loan balance never decreases. This guide covers 4 methods across every step for QuickBooks Desktop Pro, Premier, and Enterprise across versions 2022 through 2025.

What Is Recording a Loan in QuickBooks?

Recording a loan in QuickBooks means entering every financial event tied to that loan into your books so your balance sheet reflects the true state of the debt at any point in time. There are three separate events you need to record:

1. Receiving the loan funds -- a deposit that increases your bank balance and creates a matching liability
2. Making payments -- a split transaction that reduces both the liability (principal) and records the cost of borrowing (interest)
3. Closing the loan -- confirming the liability account reaches zero when the loan is paid off

QuickBooks Desktop handles all three through its Chart of Accounts and the Banking menu. The liability account tracks what you still owe the lender. Without that account, every loan payment looks like a business expense instead of a debt repayment, which distorts your profit and loss statement.

A short-term loan is any loan you expect to repay within 12 months. A long-term loan lasts longer. QuickBooks uses different account types for each, and choosing the wrong one places the debt in the wrong section of your balance sheet.

Before You Begin

Gather these details before opening QuickBooks:

• The full loan amount (the principal you borrowed)
• The interest rate and whether it is fixed or variable
• The loan term (number of months or years)
• The payment schedule (monthly, quarterly, or other)
• The lender name as you want it to appear in your books
• The date the loan was funded (the date money hit your bank account)
• Whether the loan is for cash or for a physical asset such as a vehicle or piece of equipment

You will also need administrator access to QuickBooks Desktop to create new accounts in the Chart of Accounts.

Step-by-Step Guide

Method 1: Set Up the Liability Account

Every loan needs a dedicated liability account before you record anything else.

1. Open QuickBooks Desktop and go to Lists > Chart of Accounts
2. Click the Account button at the bottom left and select New
3. On the account type screen, choose the correct liability type:

- Select Other Current Liability if the loan will be paid off within 12 months

- Select Long Term Liability if the loan extends beyond 12 months

1. Click Continue
2. In the Account Name field, enter a descriptive name such as "Business Line of Credit - First National Bank" or "Equipment Loan - 2024 Truck"
3. Leave the Opening Balance field blank at this stage. You will record the actual balance when you record the deposit in Method 2.
4. Click Save and Close

The account now appears in your Chart of Accounts under either Current Liabilities or Long-Term Liabilities depending on the type you selected.

Method 2: Record the Loan Funds as a Deposit

When the lender deposits money into your business bank account, you need to record that deposit in QuickBooks with the liability account as the source.

1. Go to Banking > Make Deposits
2. If the Payments to Deposit window opens, click Cancel -- you do not need it here
3. In the Make Deposit window, select the bank account the loan was deposited into from the Deposit To dropdown
4. Enter the Date the funds arrived in your account
5. In the Memo field, enter something descriptive such as "Loan proceeds - Business Line of Credit"
6. In the deposit detail grid, click the first blank row under From Account
7. Select the liability account you created in Method 1
8. Enter the full loan amount in the Amount column
9. Click Save and Close

Your bank account balance increases by the loan amount, and the liability account now shows the same amount as a balance owed. The two figures are equal and opposite, which is exactly what your balance sheet should show.

Method 3: Record Loan Payments (Splitting Principal and Interest)

Each loan payment has two components: the amount that reduces your principal balance and the interest charge. You must split these into separate lines in QuickBooks.

First, create an Interest Expense account if you do not already have one:

1. Go to Lists > Chart of Accounts
2. Click Account > New
3. Select Expense as the account type
4. Click Continue
5. Name it "Interest Expense" or "Loan Interest"
6. Click Save and Close

Now record each payment:

1. Go to Banking > Write Checks
2. In the Bank Account field, select the account the payment comes out of
3. Set the Date to the payment date
4. In the Pay to the Order of field, enter the lender name
5. Enter the total payment amount in the dollar field (the full payment, not just principal)
6. In the Expenses tab at the bottom, add the first line:

- Account: select your liability account (e.g., "Equipment Loan - 2024 Truck")

- Amount: enter the principal portion of this payment only

1. Add a second line directly below:

- Account: select your Interest Expense account

- Amount: enter the interest portion of this payment

1. The two lines must add up to the total check amount
2. Click Save and Close

Your lender's monthly statement or amortization schedule will show you exactly how much of each payment is principal versus interest. Use those figures each month.

Method 4: Record a Vehicle or Equipment Loan

When you take out a loan to purchase a physical asset, you need to create two accounts -- one for the asset and one for the liability -- and link them through a journal entry.

Step 1 -- Create the Fixed Asset account:

1. Go to Lists > Chart of Accounts
2. Click Account > New
3. Select Fixed Asset as the account type
4. Click Continue
5. Name it after the asset, for example "2024 Ford Transit Van"
6. Leave the opening balance blank
7. Click Save and Close

Step 2 -- Create the Long Term Liability account:

Follow the same steps as Method 1, naming it to match the asset, for example "Ford Transit Van Loan - First National."

Step 3 -- Record the purchase with a journal entry:

1. Go to Company > Make General Journal Entries
2. Set the Date to the purchase date
3. On the first line:

- Account: select your Fixed Asset account (e.g., "2024 Ford Transit Van")

- Debit: enter the full purchase price of the asset

1. On the second line:

- Account: select your Long Term Liability account (e.g., "Ford Transit Van Loan")

- Credit: enter the same amount

1. Add a Memo describing the transaction: "Vehicle purchase financed through First National Bank, Loan #XXXXX"
2. Click Save and Close

Going forward, record all payments for this loan using the split-payment method in Method 3, referencing the liability account you just created.

Tips and Variations

If you made a down payment on the asset, the journal entry changes. The fixed asset debit stays the same (full purchase price). But the credit side splits: one line credits your bank account for the down payment amount, and a second line credits the liability for the financed portion.

If your loan has fees or points added to the principal, record only the net proceeds in your bank deposit. The fees can go to a separate expense account at the time of origination.

For lines of credit, use the same liability account structure. Every draw against the line is a deposit with the liability account as the source. Every repayment is a Write Check splitting principal and interest.

If your version of QuickBooks Desktop includes Loan Manager, you can access it under the Banking menu. Loan Manager can generate an amortization schedule automatically, which removes the guesswork from splitting principal and interest on each payment. Not all versions include it; QuickBooks Pro 2022 and later versions may have removed the feature.

Common Mistakes to Avoid

Booking the loan as income. When you receive loan proceeds and do not use a liability account, QuickBooks may treat the deposit as revenue. This inflates your income and overstates your tax liability. Always offset the deposit with a liability account, never with an income account.

Forgetting to split principal and interest. If you write a single check to the lender and assign the entire amount to the liability account, your interest expense never gets recorded. Your books will show the loan balance decreasing too quickly, and your profit and loss statement will be missing the interest expense deduction.

Using the wrong liability type. Putting a 5-year loan into an Other Current Liability account makes it appear due within 12 months, which misrepresents your financial position to lenders or investors reading your balance sheet.

Leaving the liability account balance wrong at year-end. If you make 12 payments during the year but your liability balance does not decrease by the right amount, compare your QuickBooks balance to the lender's year-end statement. Discrepancies usually come from missed payments or incorrect principal splits.

Recording loan payments as expenses. The principal portion of a loan payment is not an expense -- it is a reduction of a liability. Only the interest portion is an expense. Recording the whole payment to an expense account understates your net income.

When to Call Support

Reach out to the QuickBooks support phone number if:

• Your liability account balance does not match the lender's statement after reconciling all payments
• You need to record a complex loan structure such as a balloon payment, variable interest rate adjustments, or a loan with capitalized fees
• You acquired a business with existing loans and need to enter historical balances without distorting prior-period financials
• QuickBooks Loan Manager is giving errors or refusing to save the amortization schedule
• You need to record a loan payoff that includes a prepayment penalty

For general accounting guidance on how loans should be classified on your balance sheet, a CPA familiar with small business bookkeeping is the right resource.