Account for a loan with journal transactions

Here's how to account for receiving your loan and paying it off.

Accounting for receiving your loan

1. On the left navigation menu, click Accounting > Chart of Accounts.
2. At the top right, click Add a new account.
3. In the Account Type field, select the Loan and Line of Credit account under the Liabilities & Credit Cards section.
4. Enter an Account name (e.g. Bank loan)
5. Edit the account currency if necessary, and optionally enter an Account ID and description.
6. Click Save.
7. On the left navigation menu, click Accounting > Transactions.
8. On the top right, click More, then select Add journal transaction.
9. In the new transaction, enter the date and description.
10. Debit your checking account (or the account where you receive the loan) and credit your newly created liability account (Bank Loan) with however much you have set aside for a loan.
11. Click Save.

You have now accounted for the loan in Wave.

If you’ve connected your bank account to Wave, it will import the deposit transaction showing the loan funds available in your checking account. You’ve already accounted for this with the journal transaction you just created, so you can go ahead and delete the transaction when Wave imports it. You can also skip using journal transactions to account for your loan if you import your bank transactions into Wave. Learn more in How to account for loans and lines of credit with income and expense transactions.

Accounting for loan repayment

You will need to create another journal transaction to account for the repayment. The example below shows how to account for a loan repayment of $100, where 5% of the payment is interest.

1. On the left navigation menu, click Accounting > Transactions.
2. At the top right, click More, then select Add journal transaction.
3. Enter the date and description.
4. Under the Debit column, enter $95 as the amount, then in the Account field of this line, select the loan account (Bank Loan) you created when accounting for receiving the loan.
5. Under the Credit column, enter $100 as the amount, then in the Account field of this line, select the bank account you are repaying the loan from.
6. Click Add line to add a third line to the journal entry.
7. Under the Debit column, enter $5 which is the amount for the interest. Select Interest Expense as the account of this line.
8. Click Save.