All Collections
TrulySmall Accounting
Dive Deeper
TrulySmall Accounting: Record Fixed Loan Payments
TrulySmall Accounting: Record Fixed Loan Payments

A step-by-step guide to set up and record fixed loan & interest payments

Kashoo avatar
Written by Kashoo
Updated over a week ago

A Fixed Loan is one where the entire loan amount is deposited into your bank account, then you repay the loan on a set time frame, generally once a month. Your recurring interest payments are tracked separately. Once you have secured the loan, there are just 4 steps to track it in TrulySmall Accounting.

The process will differ based on whether your accounts are connected to your TrulySmall Accounting business.

Related article: Connecting Bank Accounts

Step 1: Create a Liability Account

If your Loan account is connected to your TrulySmall Accounting business, skip this step.

To set up a non-connected Liability account to track the loan repayment, click on the Accounts page in the menu. Click on the + sign above the Accounts list and select the "Add Account" option.

In the Add Account window, select the "Type of Account" based on the loan term.

  • If the loan duration is for 1 year or less, create the account as a "Current Liability" type.

  • For loans longer than 1 year, create the account as a "Long Term Liability" type.

For "Start Date", if the loan has been secured after you begin tracking your business in TrulySmall Accounting, the "Start Date" should be the date the loan was secured. Leave the "Opening Balance" set to zero; we will fund the loan using an Adjustment in the next step. For a loan you've had prior to when you began tracking your business in TrulySmall Accounting, set the "Start Date" to the TrulySmall Accounting business' transaction start date, and set the "Opening Balance" to the current balance of the loan.

Now, click on the Add button to add the account.

Note: If you don't have a connected Bank account and have not yet created one in TrulySmall Accounting, you will want to do so now.

Step 2: Make the Loan Funds Available

If your Loan and Bank accounts are connected to your TrulySmall Accounting business, skip this step.

If your Loan and Bank accounts are not connected, you will now want to fund your Bank account with the loan funds. Click on the loan liability account in the Accounts list, then click on the + Add Adjustment button above the transaction list.

For newly secured loans, set the "Date" to the date the loan was funded (usually not the same day the loan was secured). For existing loans, set the "Date" to your TrulySmall Accounting business' transaction start date. Define the "Credit" amount as the loan balance coming from the loan liability account, then "Debit" that same amount going to the bank account you'll draw set as the debit account. Click on the Post button to add the adjustment.

Step 3: Record a Loan Payment

When you have made a loan payment, you will want to record it in TrulySmall Accounting. This step will differ based on whether your accounts are connected to your TrulySmall Accounting business.

Connected Accounts

If your Bank and Loan accounts are connected to your TrulySmall Accounting business, when the bank feeds are processed, the loan withdrawal and payment transactions will appear in your Inbox. TrulySmall Accounting will identify the match. Click on the Match Found button and confirm the match to post the transactions.

Non-Connected Accounts

Click on the Transactions page from the menu, then click on the + Add button above the transaction list and select the "Transfer" option.

In the Add Transfer window, select the "Date" the payment was made and define the amount you paid. The "Withdraw From" account will be the bank account you made the payment from and the "Deposit Into" account will be the loan liability account. Click on the Post button to add the Transfer.

Step 4: Separate Your Loan Interest Payments

To separate the interest payment from the loan principle payment, click on the Accounts page, then click on the loan principle account in the Liabilities / Credit Cards section of the list.

Note: If your Loan account is a connected account, you may need to contact the TrulySmall Accounting Customer Success team before proceeding.

You can choose from one of the two options:

  • Separate the interest payment from each individual payment

  • Separate the interest payment periodically - generally quarterly or at end of year

For Individual Payments

Using this option, you will create an adjustment after each payment is transferred to your loan account.

From the Accounts page click on the loan liability account, then click on the + Add Adjustment button above the transaction list. Set the "Date" to the date matching the loan payment. The "Credit" amount from the loan interest account should equal the interest charge for that specific payment. Apply that same amount as a "Debit" to the "Bank Charges and Interest Expense" account. Click on the Post button to post the adjustment.

For Periodic Payments

Alternatively you can choose to adjust the interest payments periodically. Whichever period you choose, generally quarterly or annually, you will still transfer the individual loan payments to the loan account, but only adjust out the Interest based on this periodic preference.

At the end of your determined period compare the loan liability account balance in TrulySmall Accounting to the loan balance on your bank statement, then transfer the difference to your interest expense account.

From the Accounts page click on the loan liability account in the accounts list, then click on the + Add Adjustment button above its transaction list. Set the "Date" to the date matching the bank statement. Set the "Credit" amount to the difference amount you calculated, then apply that same amount as a "Debit" to the "Bank Charges and Interest Expense" account. Click on the Post button to add the adjustment.

Note: If you plan to track your interest payment expenses for the loan in a specific account just for that purpose, create the account with the account type "Expense". This will then be the Debit account you'll use in the step described above.


_________________________________________________________________

Did this answer your question?