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How do I set up a car loan in QuickBooks?
I recently started a local door-to-door delivery service that requires me to take out a loan to purchase a vehicle. I have been using QuickBooks to keep tabs on my business expenses, but I can’t figure out some specifics. How do I set up a car loan in QuickBooks?
Michael Miserendino · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
First, you need to create an account that tracks the vehicle.
- Step 1: Select ‘Chart of Accounts’ under the Your Company tab.
- Step 2: Select ‘New’.
- Step 3: Select ‘Fixed Asset’ (assuming your vehicle will likely be used for over a year).
- Step 4: Select ‘Detail Type’ to include specific information about the account.
At this point, you should have a blank account with all of the prerequisite information ready to begin tracking your purchase.
Next, record your car purchase in the newly created account.
Enter information like the cost, details about the vehicle, and the date purchased, which will be required to accurately account for depreciation. Select ‘Track Depreciation’ of this asset so that a depreciation sub-account is made for that asset.
Next, create a Liability Account.
This account will track and manage all your liabilities moving forward. To do this, you will need to follow the steps listed above to create an account that tracks your vehicle. However, this time make sure to select ‘Long Term Liability’. Click Next and enter the appropriate details.
Lastly, create a Journal Entry that covers the specifics of your assets.
- Step 1: Select ‘Create’.
- Step 2: Select ‘Journal Entry’.
- Step 3: Select your Liability Account.
- Step 4: Enter the amount of the loan on the credit side.
- Step 5: Link the desired Asset Account (in this case, the one with your new vehicle).
- Step 6: Enter the loan amount again but on the debit side to balance the ledger.
You have now properly tracked your new vehicle.
Keep in mind: You must update the books regularly as the loan details change, such as payments or any refinancing.
View full answer
- Gregory R.
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