Learn how to record your assets, loans, loan payments, and asset depreciation in QuickBooks Online.

In the course of running a business, you may need to make a loan to acquire new assets which have depreciating value over time. These are items like vehicles, equipment, machinery, buildings, etc. Here’s how you record them.

Set up an asset account

  1. Go to Settings ⚙ and select Chart of Accounts.
  2. On the upper right, select New.
  3. From the Account Type drop-down menu, select either Fixed Assets or Other Assets.
    Note: Consult with your accountant on what to select. Only certain types of assets will cause the depreciation question to populate.
  4. Select the detail type of asset (select the closest possible).
  5. Name the account.
  6. Depending on the item, mark the Track depreciation of this asset box. (If selected, the system will automatically create a Depreciation subaccount for the item).
  7. Fill in the original cost fields. (If recording the loan, please leave this blank.)
  8. Select Save and Close.

The following instructions are only the basics on how to set up loans for assets. There are things to consider when making a purchase, such as a trade-in, down payment, fees, taxes, and so on. You need to consult with your accountant to discuss how to account for these variables.

Set up a liability account

You need to set up a liability account for the loan you’ll use to purchase a new asset.

  1. Go to Settings ⚙ and select Chart of Accounts.
  2. On the upper right, select New.
  3. From the Account Type drop-down menu, select Other Current Liabilities or Long-term Liabilities.
  4. Choose a detail type (a description is listed for each option).
  5. Name the account.
  6. Leave the Unpaid Balance blank.
  7. Select Save and Close.

Now that you have this in place, you'll need to create a Journal Entry to record the amount of the loan to the proper accounts.

  1. Go to the Create ⨁ icon and select Journal Entry.
  2. For the first line under the Account column, select the new liability account.
  3. Enter the amount of the loan under the Credits column.
  4. For the second line, select the appropriate asset account under the Account column.
  5. Under the Debits column, enter the amount of the loan.

Here's an example:

Account Debits Credits
Loan - Truck (liability account) $10,000
Truck (asset account) $10,000

When you make a journal entry, the credits and debits must equal to zero. In the given example, we are increasing, or crediting, the liability/loan account and increasing, or debiting, the appropriate asset account.

To pay and amortise the debt of an intangible asset, see amortisation schedule in QuickBooks Online.

Record the payment for your loan

  1. Go to the Create ⨁ icon and select Cheque.
  2. Choose the bank account you use to make a payment.
  3. From the Payee ▼ drop-down menu, select your creditor.
  4. If this is a hand-written cheque, enter the Cheque no. and the appropriate Payment date.
  5. On the Amount column, enter the full amount of the payment (principal + interest).

If you want to track both principal and interest, you need to list two accounts in the Category section below the cheque. One is the loan liability account, where you enter the total principal paid as the amount, and an interest expense account with the corresponding amount of interest paid.

To set up an interest expense account

  1. Under the Category column, enter “Interest paid for loan” then select + Add Interest paid for loan.
  2. The Account window pops up.
  3. From the Detail Type ▼ drop-down menu, choose Interest Paid.
  4. Select Save and Close.

    Note: The amount on your cheque must equal the total of the lines listing principal and interest. For specific information on what accounts should be used, consult your accountant or bookkeeper.

  5. Select Save and close.

QuickBooks Online doesn't automatically depreciate fixed assets. Instead, it's a manual process using journal entries.

 Note: You can make this process more automated by setting up specific journal entries on a time schedule using Recurring Transactions.

 

Depreciate an asset

First, set up a depreciation expense account (if not already created):

  1. Go to Settings ⚙ and select Chart of Accounts.
  2. On the upper right, select New.
  3. From the Account Type ▼ drop-down menu, choose Other Expense.
  4. From the Detail Type ▼ drop-down menu, choose Depreciation.
  5. Enter your desired account name such as Asset Loan Depreciation Expense.
  6. Select Save and Close.

At the end of the year when you or your accountant have calculated the depreciation amount, enter the transaction:

  1. Go to the Create ⨁ icon and select Journal Entry.
  2. In the first line:
    • For Account, select your depreciation expense account.
    • Under Debit, list the amount of the depreciation.
  3. On the second line:
    • For Account, select the asset account you are depreciating.
    • Under Credit, list the amount of depreciation.
  4. Select Save.