How do I set up and track a line of credit?

To track a line of credit in QuickBooks Online, we set it up as a specific type of liability account. This allows you to record funds drawn from the line and payments made back to it.

Set up the line of credit account

Select the Settings gear icon.
Choose Chart of Accounts.
Select New.
In the Account Type dropdown, select Long Term Liabilities (for lines payable over a year) or Other Current Liabilities (for lines payable within a year).
In the Detail Type dropdown, select Line of Credit.
Give the account a name (e.g., “Bank Line of Credit”).
(Optional) Enter the credit limit in the Description field or the Name field, as there is no dedicated field for the limit.
Select Save and close.

Track money borrowed (advances)

When you transfer money from your line of credit into your bank account:

Select the + New button.
Choose Transfer.
Set the Transfer Funds From dropdown to your line of credit account.
Set the Transfer Funds To dropdown to the bank account where the money was deposited.
Enter the Transfer Amount and Date.
Select Save and close.

Track expenses paid directly from the line of credit

If you use the line of credit to pay a vendor or supplier directly (without depositing the money into your bank account first):

Select the + New button.
Choose Expense or Check.
In the Payment account field, select your line of credit account.
Enter the payment details and select Save and close.

Track payments made to the line of credit

When you make a payment to pay down the principal on the line of credit:

Select the + New button.
Choose Transfer.
Set the Transfer Funds From dropdown to the bank account you paid from.
Set the Transfer Funds To dropdown to your line of credit account.
Enter the Transfer Amount (the principal portion only) and Date.
Select Save and close.

Note: If your payment includes interest, you will need to record a separate expense transaction for the interest portion, or split the transaction if paying via check.