| When you borrow money, you need to record as an asset the receipt of cash or the item you purchased on credit, and you must record the liability that offsets that asset. If the loan will be paid in full within a year, it is a current liability. If the payback period will be longer than one year, a long-term liability exists. This example shows how to set up a long-term loan. - Press Ctrl+A to open the Chart of Accounts list.
- Press Ctrl+N to open the New Account window.
- Select Long Term Liability as the account type.
- Enter a name for the loan.
- Indicate whether this is to be classified as a subaccount.
- Enter an optional description for the loan.
- Enter an optional account number and tax line for the loan.
- Click OK.
Did You Know? The name you give the loan is the name that appears on your balance sheet. Account names appear on your financial statements exactly as you enter them, so be sure you choose the name carefully. |
Did You Know? You can split a loan between its current and long-term portions. The amount of the loan that will be paid within one year is a current liability; the balance is a long-term liability. Some companies record the entire loan in the long-term liability part of the balance sheet. Others record the loan in two parts, reflecting both the current and long-term portions. |
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