How to Track a Line of Credit

To track a line of credit (LOC) in QuickBooks Online, we recommend setting it up as a Credit Card account type. This allows you to track borrowed funds, interest charges, and repayments accurately.

Set up the line of credit account

1. Select the Settings gear icon, then choose Chart of Accounts.
2. Select New to create a new account.
3. In the Account Type dropdown, select Credit Card.
4. In the Detail Type dropdown, select Credit Card.
5. Give the account a name (e.g., “Line of Credit”).
6. Leave the Balance field blank, as you will record the initial transaction separately.
7. Select Save and close.

Record funds drawn from the line of credit

When you transfer money from the LOC to your bank account:

1. Select the + New button.
2. Choose Bank Deposit.
3. In the Deposit to field, select the bank account where the funds are being deposited.
4. In the Add funds to this deposit section:
   • Received from: Enter the name of the financial institution or a description (e.g., “LOC Draw”).
   • Account: Select the Line of Credit account you created.
   • Amount: Enter the amount deposited.
5. Select Save and close.

Record interest charges

To record interest charged by the financial institution:

1. Select the + New button.
2. Choose Expense.
3. Payee: Select the financial institution.
4. Payment account: Select the Line of Credit account.
5. Payment date: Enter the date the interest was charged.
6. In the Category column, select your Interest Expense account.
7. Enter the Amount of the interest.
8. Select Save and close.

Record a repayment

When you pay back the principal or interest on the line of credit:

1. Select the + New button.
2. Choose Pay down credit card (or search for “Pay down credit card”).
3. Credit card: Select the Line of Credit account.
4. Payment account: Select the bank account used to make the payment.
5. Payment amount: Enter the total amount paid.
6. Payment date: Enter the date of the payment.
7. Select Save and close.

This creates a transfer that reduces the balance of your LOC and reduces your bank account balance.