Here's how to account for receiving your loan and paying it off.
Accounting for receiving your loan:
- Under the Accounting tab in the left-hand navigation menu, select Chart of Accounts, then the Add an Account button.
- Scroll down to Liabilities & Credit Cards and select Loan & Line of Credit.
- Edit the name so you can easily recognize the loan. You can also edit the account currency if necessary, and include the account number. Click Save.
- Under Transactions, click More > Add journal transaction. You need to create a transaction that indicates the availability of the loan funds, so you’ll debit your checking account and credit your newly created liability account with however much you have set aside for a loan.
- 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 transactions when Wave imports it.
You’ve accounted for your loan in Wave!
You can also skip all the journal transactions and use your bank transactions instead! Read all about that here.
Accounting for loan repayment:
You will need to create another journal transaction. For example, if you want to indicate a loan repayment of $100, where 5% of the payment is interest, the journal transaction will look like this:
- A $95 debit to the loan account you created
- A $100 credit to your business checking account, or whatever bank account you are repaying the loan from
- A $5 debit representing interest (use the Interest Expense under Expenses)
Wondering how to enter journal entries with more than two lines? In the example above, you actually need three lines in your journal entry in order for it to balance. Just click Add Debit (in this case) or Add Credit to add another line or lines to your journal transaction.