How to Record a Loan in QuickBooks with the Down Payment Applied to the Asset

In this blog post, you’ll learn how to record a loan in QuickBooks Online with a down payment. 

Down payments can be applied to the asset or to the loan. I’ll show you both methods.

Quick Instructions:

  1. Navigate to the Chart of accounts
  2. Click the +New button
  3. Select Assets from the icons at the top
  4. Select Fixed Assets in the Save account under drop-down menu
  5. Select anything from the Tax from section drop-down (this doesn’t matter)
  6. Enter an Account name
  7. Click Save
  8. In the Chart of accounts click the New button
  9. Select Liabilities from the icons at the top
  10. Select Long Term Liabilities in the Save account under drop-down menu
  11. Select anything from the Tax from section drop-down (this doesn’t matter)
  12. Enter an Account name
  13. Click Save
  14. In the Chart of accounts click View register to the right of the loan account 
  15. Click Add journal entry
  16. Enter the date of the down payment
  17. Under ACCOUNT enter the asset account
  18. Under INCREASE enter the loan amount
  19. Click Save
  20. Click the +New button in the left side menu
  21. In the VENDORS column select Check (if you paid by check), otherwise select Expense
  22. Payee is the company you purchased the asset from
  23. Bank account is the account the money came from
  24. Payment date is when you made the down payment
  25. Under CATEGORY select the asset account
  26. Under AMOUNT enter the amount of the down payment
  27. Click Save and close

Keep reading for a complete walkthrough with screenshots:

Creating the Asset & Loan Accounts

The first step is creating accounts in the Chart of accounts for both the asset and the loan.

I have the Chart of accounts bookmarked in the QuickBooks menu. To bookmark it click the pencil icon next to BOOKMARKS. Search for Chart of accounts, check it off, and click Save.

Bookmark the Chart of accounts in QBO

Within the Chart of accounts click the green New button on the right.

New button for creating new accounts in the Chart of accounts in QBO

Create Asset Account

Creating a fixed asset account in the QBO Chart of accounts

At the top of the New account pop-out click the Assets icon.

In the Save account under drop-down select Fixed Assets.

Tax form sections doesn’t matter, I usually select the first item in the list.

The  Account name should be something that makes it clear to you what the asset is. If you’re purchasing a truck don’t name it “business truck.” Name it something like “2024 Toyota Tacoma”.

Description can be left blank but you can also use this to add additional information like the vehicle VIN.

When ready click Save.

Create Loan Account

Creating a loan account in the QBO Chart of accounts

To create the loan account click the green New button again.

At the top of the New account pop-out click the Liabilities icon.

In the Save account under drop-down select Long Term Liabilities. (If the loan will take you less than year to pay off, select Other Current Liabilities).

Tax form sections doesn’t matter, I usually select the first item in the list.

The  Account name should be something that makes it clear what the loan is for, or who it’s from. It’s common to include the last 4 digits of the loan number like you would with a bank account.

Description can be left blank but you can also use this to add additional information like who issued the loan, full loan number, etc.

When ready click Save.

Record Loan Amount

In the Chart of accounts search for the loan account.

Open the register for a loan from the Chart of accounts in QBO

Click the View register link to the right of the loan account.

Entering a loan for an asset in the liability register in QBO

Click Add journal entry on the left.

Enter the date of the loan. Skip PAYEE. Under ACCOUNT select the asset account. Under INCREASE enter the loan amount. Click Save.

Journal entry created by using the Add journal entry in the register in QBO

This created a journal entry in the back end. If you’re familiar with journal entries you can skip the register and just use that instead.I find that it’s easier for people to understand increase/decrease rather than debit/credit.

Recording the loan amount automatically added $20,000 to the asset register. However, that’s not the total value of the asset. It was $25,000, $5,000 of that was a down payment.

Record Down Payment

If the bank account you paid the down payment with is connected to QuickBooks it will show up in Bank transactions.

I don’t have any banks connected to my demo QuickBooks so I’m going to manually enter it by creating a check.

Creating a Check using the +New button in QBO

Click the +New button in the left side menu. Then click Check in the VENDORS column.

Recording a down payment for an asset paid with a check in QBO

The Payee is the company you purchased the asset from. Bank account is whichever bank account the money came from. Payment date is when you made the down payment.

In the lower section under CATEGORY select the asset account. Under AMOUNT enter the amount of the down payment. When ready click Save and close.

The asset now has a value that matches what I paid for it.

A fixed asset on the balance sheet in QBO

If you want to know how to record your loan payments check out the blog post: How to Record A Payment To A Loan In QuickBooks Online

Scroll down if you’d like to watch the video version.

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This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Gentle Frog, LLC does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Gentle Frog, LLC does not warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers and viewers should verify statements before relying on them.

One Response

  1. You deserve more than a cup of coffee for this one! Life Saver at all times of day and night! Amazing instructions that are easy to follow when it’s a more unique situation!

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