Line of Credit

filch

I just want to see if I can get my brain around this so please bear with me as I am no expert.

We have a line of credit that we work out of and in Waves, it was originally set up incorrectly as an asset account. So, I created a new liability account for the LOC and moved the transactions I needed into this new account as of the first of the year. But then, it was messed up because whenever a deposit was made, it increased the liability and whenever money was paid out of the LOC, it decreased the liability. So, am I correct in thinking that I need to set up a new account (like a checking account (or can I just use the CASH account?) and then create manually a journal entry for EVERY transaction that properly debits and credits the LOC? A lot of manual labour if that is the case.

Thanks
Dave

AlexL

Hey @filch . A liability represents money owed, so you would in fact want your line of credit account to show up under Liabilities. The debits and credits do work differently on a liability account, as when you create an expense, it's money owed, and when you record an income transaction, it's you paying off the expenses (or money owed) incurred.

To be clear though, I'd highly recommend reaching out to an accountant or CPA as Lines of Credit fall into more complex accounting and I don't want to advise you on the wrong way to account for this.

filch

OK thanks for your response and sorry for my late response.