If you have viewed your QuickBooks Chart of Account Liability Types, you will notice that there are two. One is the Other Current Liability, which is used to track liabilities that a company expects to pay within a year.
Some examples might be Accounts Payable, Credit Card Accounts, Accrued Vacation Pay, Payroll Liabilities or the HST Payable.
The other liability type is Long Term, which is not likely to be paid off within a year. Examples: Term Loan and Advances from Related Parties.
I will now show you how to set up a long term liability account for a Trailer.
Hopefully, you know by now how to set up an account. If not – Menu Bar/List/Chart of Accounts/right click on the mouse/New.
As shown on the left, you will find Long Term Liability in the Other Account Types drop-down box. After highlighting it I will click on Continue and insert in the Account Name field – Trailer Loan. To complete this task click on Save & Close.
I now have the account set up but still need to add the opening balance, which will record the cost and the liability.
There are two ways that I can accomplish this. I can make a general journal entry or use the register. Since the register is easier for most people, I will use it.
From the Chart of Accounts I will highlight Trailer:Cost/right click on the mouse and choose Use Register.
As shown on the right, I will enter in the Date, choose Trailer Loan from the Account field drop-down box, and in the Increase column, key in 30,000. Clicking on Record will save this entry.
The journal entry that QuickBooks makes for that entry is shown on the left. It has debited the Trailer Cost asset account 30,000, and credited the Long Term liability Trailer Loan account 30,000.
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