loan expense or check. - Example Transaction: - Loaned money to customer (Bob Smith) on today's date from the bank account. - Create a "Note Receivable" account categorized as an "Other Current Asset" rather than Accounts Receivable. - Example Entry: - Entry: Loan amount of $5,000 to Bob Smith. / - Save the transaction and review balance sheet to confirm the note receivable appears correctly at $5,000. ## Reviewing Transactions - Click on specific balance (e.g., $5,000) to see the detail. - Record showing a debit to note receivable: - Reds bank account balance by $5,000 for funds loaned. # Payment of Notes Receivable ## Receiving Payments 1. **Bank Deposit Transaction**: - Use the create button and select "Bank Deposit." - Select the correct bank account, and from the customer, select Bob Smith. - Adjust the amount received to identify any excess due to interest. - If $5,500 received, differentiate between the loan repayment and interest portion ($500). - **Accounts Involved**: - Note Receivable Account (for principal repayment). - Interest Income Account (for $500 interest). 2. **Interest Income Account**: - Type: Other Income (to show down below the operating profit line on the P&L). - Descriptions should reflect the nature of the transaction. - Total deposited includes both principal and interest ($5,500 total, $5,000 principal, and $500 interest). 3. **Post-Transaction Reports**: - After payment recorded, balance sheet shows $0 for note receivable confirming full repayment. - P&L statement reflects $500 under interest income. # Recording Notes Payable ## Definition of Notes Payable - Arises when the business takes a loan to purchase fixed assets or when cash is received from a lender (like a line of credit). ## Recording Process for Notes Payable in QBO 1. **Journal Entry for Loan Payable**: - When purchasing an asset (e.g., computer for $10,000) using a loan, record the transaction with a journal entry. - Describe the nature of the loan (e.g., from Chase Bank). - Account Type: Other Current Liability; Detail Type: Loan Payable. 2. **Payment Process for Notes Payable**: - Regular payments involve understanding payment terms (interest rate, payment amount, duration) from the amortization schedule. - Use a loan amortization calculator if a schedule isn't provided. - Example Input: - Initial Loan Amount: $10,000 - Interest Rate: 5% - Loan Term: 5 years - Calculate monthly payment = $188.71, split into principal and interest payments (e.g., September payment: $147.04 principal, $41.67 interest). 3. **Report Payment in QBO**: - Create an expense transaction to record the payment to the lender (Chase Bank). - Payment components: principal reduction and interest expense. - Confirm overall payment equals the total amount calculated ($188.71). - Confirm that P&L captures the interest payment under interest expense section. 4. **Review Reports**: - Balance sheet shows depreciation in loan payable to Chase Bank. - Interest expense recorded reflects the cost of borrowing. # Conclusion - All loan transactions must be documented accurately to reflect how business finances are managed both in receivables and payables. - Understanding this process ensures compliance with accounting standards and provides actionable insights into financial health. - For calculating amortization schedules, resources such as loan amortization calculators are helpful, ensure thoroughness in entries to maintain clear financial tracking and reporting efficiency. **Note**: Link to loan amortization calculator mentioned is available below the content for further calculations and insights based on financial transactions recorded in QBO. \n \n \n \n \n \n \n \n \n\n \n \n\n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n\n\n \n\n\n \n\n\n \n\n \n\n\n\n \n\n\n \n\n\n\n \n\n\n \n\n\n \n\n\n \n\n\n \n\n\n \n\n\n \n\n\n \n\n\n\n \n\n\n \n\n\n \n \n\n \n \n\n \n\n \n \n \n \n \n \n \n\n \n \n \n \n \n\n \n \n\n\n\n \n\n\n\n \n\n\n\n \n\n\n\n \n\n\n\n \n\n\n\n \n\n\n\n \n\n\n\n \n\n \n\n \n\n \n\n\n \n\n\n \n\n \n \n \n \n\n\n \n\n\n \n \n\n\n \n\n\n \n\n\n \n\n \n\n\n\n \n\n\n \n\n\n \n\n\n\n \n\n\n\n \n\n\n \n\n\n\n\n \n\n \n \n\n \n \n\n \n \n\n ___ **Note**: The link to the loan amortization calculator mentioned can be found below the video in the course content.