How to set up a line of credit in Personal Plus or Home & Business

Legacy KB ID: 2778

Question

How can I set up a line of credit in Personal Plus or Home & Business?

Answer

The simplest way to set up a line of credit is as follows:

1) Create an asset account with a balance equal to the value of the asset that is going to be the collateral (for example, a house worth $150,000).

2) Create a liability account with a balance equal to the amount that is currently owed.

3) Any cashflow operations are then carried out in the liability account, so increase the liability as money is withdrawn and decrease the liability as money is deposited.

4) Refer to the Net Worth Report to give a true indication of financial position.