How to Pay an Invoice With Liability in QuickBooks
There are some tricky transactions in QuickBooks. These transactions are not straightforward cash-for-services or cash-for-products transactions. They include using a barter-type exchange to pay for products and services from vendors, and paying a vendor's invoice not out of a bank or credit card account, but out of a liability account or a loan that has been set aside to make payments for another purpose. There is a procedure, though, to completing this task, as the funds cannot be removed from a liability account, but from the account where the borrowed funds are kept.
Other People Are Reading
Instructions
-
-
1
Create the liability account for the funds borrowed. Open the "Chart of Accounts" from the "List" menu in the top menu bar. When the Chart of Accounts window opens, hold the "Ctrl" and "N" keys. The Add New Account window will open. Under the "Type" box, choose either the "Current Liability" or the "Long Term Liability" option. A current liability is a liability you expect to pay within a year and a long-term liability is one you expect will take longer than one year.
-
2
Create the account to store the funds from the liability. A liability creates a debt on one side of the balance sheet. The funds from the liability are typically used to purchase an asset or to provide working capital, which is found on the other side of the balance sheet. If the liability is borrowed money to provide working capital for a business to purchase inventory or pay initial and other expenses, the payment for the invoice that was provided by the liability is technically paid from the working capital or other asset account funded by the liability of the loan.
You create this account by opening the Chart of Accounts and holding the "Ctrl" and "N" keys. Under the "Type" option, choose either a "Current Asset" or a "Bank" account. You can name the account "Equity Line of Credit" or "Working Capital" account.
-
-
3
Double-click on the "Equity Line of Credit" account in the Chart of Accounts. The account register will open. Enter the amount of the liability or loan into the amount column. Enter the account from which these funds are to come as the liability account name you chose. This will enter an asset balance for the borrowed funds as well as a liability for the same amount to offset the balance sheet.
-
4
Receive the invoice that needs to be paid out of the liability. To do this, click on the "Enter Bills" icon. An invoice that your company pays will be in the form of a bill sent by a vendor to you. In the "Enter Bills" window, fill in the name of the vendor you are paying, the amount you are paying and the items or expenses you are paying in the respective columns on the page.
-
5
Click the "Pay Bills" icon to open the "Open Bills" window. Locate the bill you are paying out of the liability account and click the empty box next to the "Date Due" column.
-
6
Locate the account from which you wish to pay this invoice. The "Account" box will be in the lower-right corner of the window. The account will be the "Line of Credit" or "Working Capital" account you created earlier from the amount in the liability account. When you have chosen the appropriate account, click the "Pay Selected Bills" button. You have now paid an invoice from a liability account.
-
1
