How to Record a Loan in Sage 50?

Updated On: December 4, 2024 6:24 am

Now record a loan in Sage 50 for those organizations that need to maintain specific financial records. Sage 50, is one of the most sought-after accounting software designed to assist users with the right tools to manage different financial transactions such as loans. This also comprises the loan used to manage cash flow and finance business expansion or to cover unpredictable expenses. Accurate recording of the loan ensures that the liability and related transactions are displayed properly within the books.

Recording of loans consists of creating liability accounts, recording the receipt of funds, and tracking interest payments or repayments with time. For instance, once the loan has been received, it is generally recorded as “Loan Payable,”. This is more like a credit within a liability account and a debit in the appropriate bank account to reflect the increased available cash. Likewise, periodic interest payments or principal repayments should be carefully recorded to maintain accurate records and financial statements. Sage 50’s functionality allows users to automate recurring loan payments, calculate interest, and generate reports to track the loan balance, payments, and associated expenses. With the help of a proper loan recording, the user will be assisted with effective financial management and also ensure compliance with tax regulations.

How to Record a Loan in Sage 50?

Let us take a look at the step-by-step instructions and tips to manage the loans effectively in Sage 50.

Solution 1: Record the loan as a purchase invoice

Step 1: Establish the balance

• Create a new general ledger account.
• This should be a current or long-term liability account.
• Next, click on Tasks.
• Now click on Receive Money.
• Select Vendor ID from the drop-down box instead of Customer ID.
• When you have created the lending entity as a vendor, select the vendor (bank) from which you can receive the loan.
• Select the Cash account where you need to deposit the money.
• Select the liability account that you have created above, within the Apply to Vendor Account tab.
• Now enter the loan amount.
• Now click Save.
• At the payments screen, these steps will create what would be the equivalent of an invoice for the vendor record.

Step 2: Paying the loan

• Next, you have to select Tasks and Payments.
• Now you have to select the Vendor (bank).
• Change the amount paid so that it is applied to the principal by selecting the invoice to pay.
• The Apply to Expenses tab should be selected.
• Enter the amount of interest you are paying as well as your interest expense account.
• Before printing or saving, ensure the check’s amount is correct.

Solution 2: Record as a journal entry

Step 1: Establish the balance

• Create a new GL account, often a Current Liability or Long Term Liability account.
• Create a general journal entry that credits the liability account created in Step 1 and debits the cash account.

Step 2: Paying the loan

• Choose the liability account created in step one in the Expense Account field to create a vendor for the lender.
• Next, choose Tasks and Payments.
• Now select the Vendor (bank).
• The Apply to Expenses tab should be selected.
• Enter the liability account created in Step 1 on the first line before entering the principal payment amount.
• Next, enter your interest expense account and the amount you are paying in interest on the second line.
• Ensure the amount entered on the check is correct.
• Next, you have to print.
• Finally, Save.

Also Read: Steps for Repair Sage 50 GL Account type

Record Loan Payments for a Fixed Asset

Once you buy a fixed asset and you finance it with a loan or installment plan, you need to record it in your accounts. This can be recorded as the original purchase by posting a journal. When doing this, any deposits can be included along with the fees at the same time as the purchase. To keep track of how much you have left to pay, the monthly repayments can be recorded including any interest charged.

Loan ledger accounts

Before you record the loan, you need to create additional ledger accounts.

To create a ledger account

• Click on Settings
• Click on Business Settings.
• Within the Financial Settings, click Chart of Accounts.
• Click New Ledger Account.

We recommend using the following accounts:

Name	Account number	Category
Loan or Installment Plan	2300	Checking liability
Licenses	7301	Expenses
Equipment lease and rental*	7302	Expenses
Installment plan interest	7901	Expenses

NOTE: You only require this ledger account for a car lease. If you are previously using the account numbers above for something else, you can use a different one. It does not matter which account numbers are used because the category determines where the values appear within your reports.

• Complete the details as required
• Next, click Save.

To Record the Loan Without a Trade In

As an example:

• A user purchases a car for $20,000.
• A vehicle registration fee of $250 is paid, a title fee of $100, an emissions testing fee of $75, and a documentation fee of $50, for a total of $20,475.
• The user needs to pay a deposit of $1,000.

1. Go to Adjustments
2. Go to Journals
3. Next, click New Journal.
4. Enter the date and a reference for the journal. 
5. Enter a description if needed.
6. Enter the required information to record the loan, for example:

Ledger Account *	Details	Debit	Credit
Property and Equipment (1500)	Net value of new asset	20,000.00	0.00
Sales Tax Payable (2310)	Tax on new vehicle	2,000.00	0.00
Licenses (7301)	Registration, title, testing, and documentation fees for new vehicle	475.00	0.00
Checking (1010)	Bank deposit paid	0.00	1,000.00
Loan or Installment Plan (2300)	Total purchase price less the deposit	0.00	21,475.00

7. Finally, Click Save.

To Record the Installment Plan with a trade-in

After you trade in an asset, you need to record the disposal of the previous asset and move any depreciation recorded by you within your Other Income ledger account. This step helps clear the value from your asset and depreciation ledger accounts. Next, you can record the purchase of the asset and minimize your installment plan liability by the amount of the asset you have part traded in.

For example:

• The user has purchased a car that originally cost $15,000 and has depreciated by $5,000.
• The user buys a new car for $25,000, including tax.
• The user part exchange the old car for $7,500
• Additionally the user also pays a vehicle registration fee of $250, a title fee of $100, an emissions testing fee of $75, and documentation fees of $50, giving a total of $25,475.
• You pay a deposit of $2,000.

1. Go to Adjustments
2. Click on Journals
3. Now click New Journal.
4. Enter the date and a reference for the journal. 
5. Enter a description if required.
6. Enter the relevant details to record the disposal of the old asset and clear your depreciation, for example:

Ledger Account *	Details	Debit	Credit
Property and Equipment (1500)	Disposal of old asset	0.00	7,500.00
Other Income (4300)	Disposal of old asset	6,000.00	0.00
Accum. Depreciation – Prop&Eqt (1900)	Disposal of old asset	5,000.00	0.00
Other Income (4300)	Disposal of old asset	0.00	5,000.00

7. Enter the additional information to record the installment plan, for example:

Ledger Account *	Details	Debit	Credit
Property and Equipment (1500)	Net value of new asset	25,000.00	0.00	Select this check box
Sales Tax Payable (2310)	Tax on new vehicle	2000.00	0.00	Select this check box
Licenses (7301)	Registration, title, testing, and documentation fees for new vehicle	475.00	0.00
Checking (1020)	Bank deposit paid	0.00	2000.00
Other Income (4300)	Part exchange value	0.00	5000.00
Loan or Installment Plan(2300)	Total purchase price less the deposit and part exchange	0.00	20475.00

8. Click on Save.

To post the monthly installment payments

Every time the user makes an installment repayment, they need to post another payment. Here it is required to show the repayment and interest values separately.

For example, the monthly repayments are $300. The user needs to show $250 of this is a repayment and $50 is interest.

• Go to Banking
• Now click the applicable bank account.
• Within the New Entry menu, click Expense/Payment.
• Within the Other Payment tab, verify that the correct bank is selected.
• Now enter the date of the repayment and a reference if required.
• Enter the complete amount of the repayment including the interest, for example, 300.00.
• Now enter the required information to record the repayment and interest on separate item lines, for example:

Ledger Account	Details	Total
Loan or Installment Plan(2300)	Loan or Installment Plan repayment	250.00
Installment plan interest (7901)	Loan or Installment Plan interest charged	50.00

• Click Save.

Record a Director’s Loan

Once a company receives a loan from a director, the value of the loan and the repayments are required to be recorded within the company accounts.

To enhance the way you use Sage Accounts, the toolbar options differ according to the size of the software window. It is also possible to customize the toolbars according to the individual preferences. 

In this example, the following values are used:

• A director loans the company £/€2,000
• This is repayable to the director over 2 years
• The total monthly repayment value is £/€95.83
• This is split into £/€83.33 for the loan repayment and £/€12.50 interest repayment

Create new nominal codes

Make sure that the following nominal codes exist within the accounts:

Nominal Code	Name	Management report	Section of Chart of Accounts
1200	Bank Account	Balance Sheet	Current Assets / Liabilities
2301	Director’s Loan	Balance Sheet	Long Term LiabilitiesIf the loan is to be repaid within one year, it should be set up as a Current Liability.
7903	Loan Interest Paid	Profit and Loss	Overheads

You need to create a new nominal code when a nominal code does not exist.

• Click Nominal codes
• Next,click New/edit.
• Now, Complete the Nominal Record as follows:

N/C	Enter the number for the nominal code you want to create.
Name	Enter a name for the nominal code.

•  Click Save
• Finally, click Close.

Record the receipt of the loan

The loan needs to be recorded as an increase within the balance on the correct bank account and as a new director’s loan liability on the Balance Sheet report.

To do this, post a bank receipt.

• Click Bank accounts
• Now click the Bank receipt.
• Next, complete the Bank Receipts window as follows:

Bank	Date	Ref	N/C	Details	Net	T/C	Tax
1200	Receipt date	Ref	2301	Director’s Loan	2000.00	T9	0.00

• Click Save
• Finally, click Close.

This transaction will increase the bank account balance and will be displayed as a liability within the Balance Sheet report.

Record the loan repayment

Every month it is important to record the payment from your bank account to the loan account within the Balance Sheet report and the loan interest paid nominal code on the Profit and Loss report. This bank payment minimizes the balance within the loan liability nominal code and increases the balance on the loan interest paid nominal code.

To do this, each month post a bank payment.

• Click Bank accounts
• Next, click Bank payment.
• Complete the Bank Payments window as follows:

Bank	Date	Ref	N/C	Details	Net	T/C	Tax
1200	Payment date	Ref	2301	Loan Repayment	83.33	T9	0.00
1200	Payment date	Ref	7903	Loan Interest	12.50	T9	0.00

• Click Save, then click Close.

When needed, one can set up the loan repayments and interest payments as recurring entries. This procedure should be repeated every month until the loan is completely repaid.

Also Read: Fix Sage I/O Error in the File Directory

Conclusion!

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