Line of credit

[Alan Schold]

Thanks, David, I've set up a line of credit sub-account under the Credit 
Card account with nothing in it. When the bank transfers $$ to me I'll 
put it there. However, When I pay a bill with that $$ I do not want to 
decrease the amount I owe, so I can't use that account for the 
disbursement. Obviously, when I pay the bank principal (but not 
interest) the L0C account would be debited. How would I account for that?
On 9/13/2016 9:57 AM, David T. wrote:
> Alan,
>
> Both types of account are liabilities.
>
> When you use a credit card, you borrow money, which you would track with a transaction in that amount. Same with the line of credit. (e.g., $100 from CC/LOC into Checking)
>
> The financial institution in both cases will charge you interest on the balance, which will be a transaction. (e.g., $5 from Interest to CC/LOC)
>     (Note that the interest rate is immaterial to the accounting. You only need to know the amount of interest being charged.)
>
> Finally, you must pay back the balance for both accounts with a transaction from your assets. (e.g. $105 from Checking to CC/LOC)
>
> Does that clear things up?
>
> David
>
>> On Sep 13, 2016, at 9:06 PM, Alan Schold <aschold at q.com> wrote:
>>
>> The GnuCash Wiki suggests that I should use a credit card account to track a line-of-credit loan. With all the elements (outstanding balance, payment and interest rate) potentially changing could someone give me a few details on how to set up and use such an account? Thanks
>>
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