How to record a loan

A loan is two things in your books:

• A liability account that tracks what you owe.
• The cash moving in and out of your checking account.

Record both and your balance sheet, loan balance, and interest expense all tie to the lender's statement to the penny.

1. Create (or reuse) the loan liability account

Your chart of accounts already includes Loans Payable (code 2500). Use it as is, rename it, or add one account per loan, for example "Truck Loan".

To add one:

1. Open All pages in the left sidebar, then under Accounting click Chart of accounts, then Add account.
2. Set Type to Liability.
3. Set Detail type to Long-term liability. Use Other current liability only for notes due within a year.

Two shortcuts:

• You can create the account while categorizing, right from the transaction screen. See step 2.
• If the loan or line of credit is connected as a bank feed, BooksGPT books it as a liability automatically.

2. Book the money you received (the proceeds)

When the loan money lands in your connected checking account, the deposit shows up in To review.

• Categorize the deposit to the loan liability account.
• Do not categorize it to income. Borrowed money is not revenue.

This books money into checking, and the same amount as a balance owed on the loan.

No loan account yet? Create it without leaving the screen:

1. Type the loan name in the category picker.
2. Choose Create loan / liability account.
3. Pick the detail type. The deposit is categorized to it in one step.

3. Split each loan payment into principal and interest

Every loan payment is part principal (paying down the balance) and part interest (an expense). Your lender's statement or amortization schedule shows the split.

When the payment shows up in To review:

1. Open the transaction and choose Split.
2. Part 1: the principal amount, categorized to the loan liability account.
3. Part 2: the interest amount, categorized to Interest Expense. No Interest Expense account yet? Type the name in the split's category picker and create it inline as an expense.
4. Save the split.

The result:

• The loan balance drops by exactly the principal.
• Checking drops by the full payment.
• The interest lands on your Profit and Loss.

4. If the loan account itself is connected to a bank feed

Some lenders, and most lines of credit, can be connected so the loan gets its own feed. In that case:

• When BooksGPT suggests it, pair the checking withdrawal with the loan-side deposit as a transfer, then categorize the lender's separate interest charge (if the feed shows one) to Interest Expense.
• If the feed shows only the net payment with no interest line, do not pair them. A transfer alone would book the whole payment as principal. Exclude the loan-side row and split the checking withdrawal as in step 3.

5. Starting mid-loan? Set an opening balance

Moving books into BooksGPT with a loan already running:

• Use the Opening balance field on the new-account form.
• It books the starting balance as of the date you pick, against Opening Balance Equity. That is the correct treatment for conversion balances.

Only use the opening balance for money that arrived before your books start. If the proceeds deposit is already in BooksGPT, categorize it per step 2 instead, or you will count the loan twice.

6. Check it against the lender statement

• Open the loan account's register from Chart of accounts to see the running balance.
• Use Reconcile (under Accounting in All pages) on the loan account to tie it to the lender's statement, the same way you reconcile a bank or credit-card account. This works for both loan detail types, long-term liability and other current liability.

Note for accountants: new loans default to Long-term liability (a financing activity on the cash-flow statement). If you track the current portion of long-term debt, reclassify it with a journal entry at period end.

Updated on: 03/08/2026