Not sure how to enter a car loan repayment as the funds were not deposited into my account as described in the "how to account for a loan" section
@Ajay I'd love to hear more about what funds are being used to repay the loan if they were not funds deposited into the business account. Is this a loan that are paid from personal funds? Also, is the loan itself in the business name, or your personal name?
Loan is in business name, funds were paid directly from the lender to the seller never touching any of our accounts and now we make monthly repayments to the lender for the next 5 years, I guess it works the same as a mortgage.
If you're going to account for this car loan, then I recommend using journal transactions for this. So, let’s say the vehicle is $1000, and the bank covers the full $1000. You’d create a “Vehicle Asset” account and “Vehicle Loan” account in the Chart of Accounts page. You’d then record a journal transaction where you debit the asset for $1000, and credit the loan for $1000. You can create a journal transaction in the Transactions page by clicking the "More" tab.
Did you make a downpayment on the loan? If so, this process would look a little bit different, so don't hesitate to follow up!
Ryan_W I understand everything that you have said in order to set it up but how do you account for making the monthly payment?
The monthly payment would be Debit loan (liability) Credit Cash (asset). At the end of the year your would expense the interest paid on the loan. To do this you would Debit Interest Expense (Expense) and Credit Loan. That way your loan balance should agree to your remaining principal outstanding . If you have excel, there are templates to run a loan amortization schedule.
@Ryan_W Yes, please do follow-up with details on how to set up and account for a Car Loan that involves a downpayment and long term repayments of the loan. Thank you very much!