A Line of Credit (LOC) is an account that you can draw money from as needed. Any accrued interest payments are tracked separately. In just 3 simple steps you'll quickly be up and running.
Important: This article addresses a process that applies only to non-linked accounts.
Step 1: Create a Liability Account
To set up a Liability account that tracks the LOC, click on the Accounts page in the menu. Click on the + sign above the Accounts list and select "Add Account" option.
In the Add Account window, select the "Type of Account" based on your usage of the funds.
- If you are using the LOC in a similar way as you'd use a credit card, or plan to pay back the funds within 1 year, create the account as a "Current Liability" type.
- For LOCs that you expect will take longer than 1 year to pay back, create the account as a "Long Term Liability" type.
For "Start Date", if the LOC has been secured after you begin tracking your business in Kashoo, the "Start Date" should be the date the funds were secured. For a line of credit you've had prior to when you began tracking your business in Kashoo, set the "Start Date" to the Kashoo business' transaction start date.
Set the "Opening Balance" to equal the amount of the LOC. Now, click on the Add button to add the account.
Note: If you have not yet created a Bank account in Kashoo, you will want to do so now.
Step 2: Use and Repay the LOC Funds
Use the Funds
When you elect to use the funds from your LOC, you need to add them to your bank account.
Click on the Transactions page in the menu, then click on the + Add button above the transaction list and select the "Transfer" option. Set the "Date" as the date you used the funds, and specify the "Amount" of funds you used. Select your LOC liability account as the "Withdraw From" account, and your bank account as the "Deposit Into" account. Click on the Save button to add the transfer.
Repaying the Funds
To repay the Line of Credit account, you will do the same thing but in reverse.
Click on the Transactions page in the menu. Click on the + Add button above the transaction list and select the "Transfer" option. Set the "Date" as the date you returned the funds, and the "Amount" of funds you want to put back into the LOC account. Select your bank account for the "Withdraw From" account, and the LOC liability account for the "Deposit Into" account. Click on the Save button to add the transfer.
Step 3: Record Interest Payments
Choose which account the interest payments accrue. They may accrue either in your Bank account or in your Liability account, depending on how it is set up.
Click on the Accounts page, then click on the interest accrual account in the Accounts list. Now click the + Add button, the click the "Adjustment" option (in some cases the button will be + Add Adjustment).
In the Add Adjustment window, set the "Date" to the date you paid the interest, and set the "Credit" amount to the interest payment amount. The "Debit" will be added to the "Bank Charges & Interest Expense" account. The debit amount will also be the interest payment amount. Click on the Post button to add the adjustment.
Note: If you plan to track your interest payment expenses for the LOC in a specific account just for that purpose, create that account with the account type "Expense". This will then be the Debit account you'll use in the step described above.
Related article: Record Fixed Loan Payments