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3.1
Tracking Loan Payments- Loan Transaction History
It is imperative that you learn to track your loans. In other words, all payments should be
split out respective of interest and principal portions. The best way to track your loans is
to request “Loan Transaction Histories” for each note from ALL creditors. You’ll
need to call all banks with which you have loans, as well as private lenders (John Deere,
Case, Ford, etc.)
It is easiest to set all notes up (by number) before you begin entering any transactions.
There is a place at the bottom of the Account Set-up Screen to enter an opening balance
as of a date you set. The account type is Liability, either Long Term (more than 1 year)
or Current (less than one year.)
Again, it is important to track the note by the number assigned at the lending institution.
Your beginning balance would be the (principal) balance shown just prior to your start
year. Each payment thereafter should be shown on the loan transaction history, including
the split of interest and principal. The interest portion is charged to either “Interest
(current)” or “Interest (non-current), which are both expense accounts.” All interest is
classified as SC: Finance. The principal portion is charged to the liability account you
just set up, according to the number. Since the principal portion of the payment does not
affect the Income Statement, it is not necessary to assign a class.
When all payments are accounted for, reconcile the balance the lender has provided with
your balance in QuickBooks.
If your balances don’t match, consider the following:
1. Payment was made with “outside” money.
2. Unpaid interest was rolled into the principal balance of the note.
3. Bank recorded a payment incorrectly.
4. You recorded a payment incorrectly.
5. Proceeds advanced have not been recorded in QuickBooks.
Handling a Payment Made with “Outside” Money
Income taken directly to note
Many producers take income directly from the grain elevator or livestock auction and pay
on a note without ever depositing it into the checking account. It is likely this income
was never recorded in QuickBooks. To record the income, as well as the interest and
principal portions of the note payment, you need to make a journal entry.