How do I set up my Line of Credit in QuickBooks?

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Following are the steps on how to properly set up a line of credit in QuickBooks. Don't forget, a line of credit is used like a bank account but is actually a loan payable that you have to pay back:

• Set up a bank-type account for your checking account.
• Set up a current liability type account for the Line of Credit.
• Do not enter any opening balances when creating the accounts.
• Use the checking account for all deposits and checks/debits/bill payments as usual.
• When the bank draws from your Line of Credit, use the transfer funds screen to post the transaction.
• When you make a payment to the Line of Credit, write a check (put 'autopay' in the number field if the bank debits it).
• On the first line of the check account, enter the principle amount, off-setting the Line of Credit. On the next line, hit an expense type account called Interest Expense (you only need one expense account in your Chart of Accounts for any interest that you pay) for the interest portion of your payment.
• If there are any fees incurred for using the Line of Credit, use the Write Checks screen with the appropriate account, and enter "fee" in the number field and the amount which will show up on your bank statement.
• When you get your bank statement from the checking and the Line of Credit, you will reconcile them both using Banking, reconcile.

That is basically the easiest and best practices way to set up a Line of Credit in QuickBooks.

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