Common Questions – ProfitBooks.net https://profitbooks.net Online Accounting Software for small business Fri, 19 May 2023 11:13:49 +0000 en-US hourly 1 https://profitbooks.net/wp-content/uploads/2020/11/fb-logo-150x150.png Common Questions – ProfitBooks.net https://profitbooks.net 32 32 220870594 Trademark Registration Online In USA – Explained In 5 Easy Steps https://profitbooks.net/trademark-registration-online-usa-uspto/ https://profitbooks.net/trademark-registration-online-usa-uspto/#respond Fri, 19 May 2023 12:00:23 +0000 https://profitbooks.net/?p=21798 For any business looking to establish its identity in the US market, registering a trademark is an essential step. Not only does it give the legal business ownership over its brand, but it also safeguards its intellectual property rights and establishes credibility with its customers. It’s not a perk you can get, it’s more of…

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For any business looking to establish its identity in the US market, registering a trademark is an essential step. Not only does it give the legal business ownership over its brand, but it also safeguards its intellectual property rights and establishes credibility with its customers.

It’s not a perk you can get, it’s more of a necessity. Trademark registration online in the US is the most important step for a business to convert into a serious business.

However, many American business owners are often unsure of the process involved in trademark registration online in the US. In this article, we will provide a detailed step-by-step guide to registering your trademark in the US. We will help you navigate the legal complexities and ensure that your brand is protected from any potential infringement.

Whether you are a startup or an established business looking to expand, trademark registration is an indispensable tool for building your reputation and succeeding in a competitive marketplace.

But before we get into the trademark registration process, we should know what trademark registration is in America, and why it is essential to get it done.

 

Register Trademark Online With USPTO

Register trademark online (USPTO logo)

Register trademark online (USPTO logo)

What is USPTO? Why did I mention this? Why is it important?

The United States Patent and Trademark Office (USPTO) is a government agency responsible for granting patents and registering trademarks in the United States. Essentially, it is the gatekeeper for intellectual property protection in the country.

When someone invents a new product or process, they can apply for a patent with the USPTO. If granted, the patent gives them exclusive rights to produce and sell their invention for a certain period.

The USPTO’s mission is to promote innovation and stimulate the economy by granting intellectual property rights.

Mainly, the USPTO provides resources and education to help inventors, entrepreneurs, and businesses navigate the intellectual property system.

 

Types Of Trademark Registrations In The USA

USPTO - United States Patent And Trademark Office

USPTO – United States Patent And Trademark Office

Trademark registration is a vital step in establishing and protecting your brand identity in the US. It is a legal process that involves registering your brand name, logo, or slogan with the United States Patent and Trademark Office (USPTO). The USPTO recognizes ten types of marks that you can register as a business owner. They are as follows:

  1. Word Mark
    A wordmark is a symbol consisting of drawings and standard characters. All letters and words are in Latin characters, while numbers are in Arabic or Roman figures. It includes only basic punctuation and phonetic signs without any design elements. It represents a brand’s identity clearly and concisely.
    For example; – Xerox®, The Michelin Man®, and The Nike Swoosh® are all examples of work marks.
  2. Design Mark
    A creative symbol, either a crafted phrase or an imaginative design, is what we call a design mark. To preserve its artistic flair, this emblematic artwork needs to be saved in the digital format of a .jpg file. The picture’s resolution must be between 300 and 350 dots per inch, with its dimensions stretching between 250 and 944 pixels.
  3. Color Mark
    When it comes to color-based logos, visual representations in vibrant hues are vital. These depictions must be accompanied by two essential elements – a color claim that identifies the specific shade(s) employed in the design and a separate statement that describes the color(s) location and usage within the logo. Furthermore, the color claim and location statement must use the conventional color name(s) to avoid ambiguity.
  4. Shape mark (the configuration, shape, or design of a product or product packaging)
    A unique way to identify a product or its container is through a shape mark. It’s a design that takes on a three-dimensional form or configuration. To get the ball rolling, the applicant must provide a crystal-clear representation of the mark and confirm that it’s an image in three dimensions.
    For example, the shape of the Coca-Cola bottle, the shape of the Toblerone chocolate bar, or Hershey’s Kisses are all shape marks under USPTO regulations.

    Coca Cola Bottle Shape Mark USPTO

    Coca-Cola Bottle Shape Mark USPTO

  5. Sound Mark
    To fulfill the requirements of the application process, a delightful and skillful contender should present a digital recording in one of the following formats: .wav, .wmv, .wma, .mp3, .mpg, or .avi. The size of the file must not exceed 5 MB, but the content should be as big as possible! Moreover, the applicant should exhibit their mastery by providing an exhaustive and fascinating portrayal of the sound, along with any linguistic expressions or verses utilized in it.
  6. Scent or Flavor Mark (a.k.a Olfactory Mark)
    When submitting a scent or flavor mark, it’s important to provide indisputable proof of the unique qualities that have been acquired, which includes a comprehensive description of the scent or flavor, as well as an exact sample to match. So, whether it’s a tantalizing scent or a delectable flavor, ensure you have all the necessary documentation to make your mark stand out from the rest!
  7. Touch Mark
    A distinct touch or texture can also be trademarked, although they seem to be the least popular way of trademark registration. A touch mark has to be sent in a graphical format, more information of which can be found on the official USPTO website.
    For example; Fresh Inc. has secured ownership of a registration for their delightful creation: oval-shaped soap, enveloped in cotton-textured paper, and held together by a coiled silver-colored wire, fastened to a semi-precious stone bead. It’s worth noting that the texture of the cotton paper is not the only aspect protected by the registration, but rather, the entire product as a whole.
  8. Motion Mark
    If your mark has a groovy, repetitive motion, you have the option to submit a drawing of a single moment in the movement or up to five freeze frames that capture different points in the action. Whichever showcases your mark’s commercial impact best is the way to go! And if you’ve got a cool audio or video sample that captures the essence of your mark’s motion, attach it to your TEAS form in one of these file formats: .wav, .wmv, .wma, .mp3, .mpg, or .avi. Just remember to keep it under 5 MB for audio and 30 MB for video. Of course, you’ll want to give a detailed explanation of the movement too.
  9. Collective Membership Mark
    A brand new emblem that symbolizes a group’s membership as a whole can be seen as a badge of honor, representing an association, cooperative, or similar organization.
  10. Certification Mark
    Certification marks are a fabulous way for one entity to show their trust in the quality of services or goods of another entity. These marks can take the form of a symbol, a name, a word, or any other type of creative device that captures the essence of the certification. The certification itself can cover a whole range of features, such as the material used, the region of origin, the manufacturing process, and of course, the overall quality and accuracy of the goods or services.

 

Step By Step Process To Register Trademark Online In The USA

Trademark registration online USA process - USPTO

Trademark registration online USA process – USPTO

The first question to ask is whether getting a trademark registered for your company in the USA is the best decision for you. If you have come this far in the article, we can assume that you’ve made this decision already. So the next question that arises is how your trademark should look. This takes us to the first step that comes under trademark registration in the USA.

But before we dive into it, there is some basic information that you need to know, so you don’t run into any troubles. Here are the things that you need to consider before we discuss the step-by-step procedure to register the trademark:

  • Identifying the mark format: To register your trademark, it’s crucial to include a clear and accurate depiction of it in your application, also known as a “drawing”, “mark drawing” or “representation of the mark” by the USPTO.
  • Identification of goods and/or services: As a business owner, you need to identify whether your business is eligible as per USPTO regulations, either as providing goods and/or services. You can watch this video to learn more about how to properly identify this.
  • Trademark search: Search the USPTO database for similar trademarks before filing for federal registration. This helps avoid infringing on anyone else’s trademark rights.

 

Step 1: Selecting The Right Trademark

Businesses and individuals often make the mistake of selecting a mark that might be either very difficult or even impossible to register for various reasons. Not all marks can pass muster with the USPTO, and not every mark has the legal muscle to protect your brand from copycats.

Moreover, not all marks are legally defensible, meaning that some marks may not be sufficient to support a legal claim by the owner who seeks to prevent others from using a comparable mark on related goods or services. Therefore, it’s imperative to approach this step with great care and caution to ensure your mark meets the requirements for registration and legal protection.

Watch this official USPTO video to know in detail how to select a protectable trademark.

 

Step 2: Application Filling & Submission

Yes, all the basic work is done, and now you can get ready to submit your application. Here are the milestones that you have to complete to do so:

Setup a USPTO account: The reason you need to have an account registered at the USPTO is that you will need to access the Trademark Electronic Application System (TEAS) which enables you to register a trademark online. Before TEAS, business owners would have to physically file for a trademark. Although that is still an open option, USPTO encourages using TEAS instead, which is why over 85% of all trademarks are registered online.

Fill out the application form: You can either log on to uspto.gov, browse and find the Trademark Electronic Application System (TEAS) to apply online for your specific type of trademark. Or, you can click here and start filling out the form now! But before you start applying, keep in mind that USPTO charges an application fee simply to send it in. Not all applications that are sent in are accepted, and the application fee is non-refundable. So make your decision with complete knowledge of the fee structure. You can read it here.

Keep monitoring application: By regularly keeping tabs on your application’s progress through the Trademark Status and Document Retrieval (TSDR) system, you can ensure that you don’t miss any important filing deadlines. So, don’t be a slacker and check on your application every three to four months after its initial filing. Remember, the early bird catches the worm, or in this case, the timely filed trademark application! Save this link to monitor and track your application.

 

Step 3: Collaborate With The Assigned USPTO Examining Attorney

After USPTO Reviews Application

Once you submit your trademark application to the USPTO and meet the minimum requirements (fingers crossed!), the USPTO assigns your application a serial number and sends it over to an examining attorney.

Unfortunately, even if you do all the right things, and it turns out that your application is later refused for legal reasons, the USPTO won’t be refunding your filing fees (sorry, not sorry). The attorney also conducts a thorough search for any potential conflicts with existing trademarks (nobody likes copycats), and examines your written application, drawing, and any specimens you provide.

So, sit tight, keep your fingers crossed, and hope that your trademark application passes the USPTO’s rigorous examination.

Refusal of Trademark Registration (Office Action)

Should the evaluating lawyer find that a trademark is unsuitable for registration, they shall dispatch a letter (office action) to you highlighting the underlying reasons for the refusal, including any shortcomings in the technical or procedural aspects of the application. If only trivial amendments are necessary, the examining attorney may reach out to you through telephone or email.

Respond timely to the attorney’s letter

When the examining attorney hits you with an office action, you’ve got three months to fire back a response that lands at the USPTO. If you miss that deadline, your application is left abandoned like a sad puppy in the rain. But don’t fret, for a small fee, you can ask for an extension of three months to gather your thoughts and regroup. In the case that you’re a Madrid applicant, you’ve got a bit more time – six months to be exact. Just don’t get too comfy, because there’s no extension available for you.

 

Step 4: Applications Gets Accepted Or Denied

So, you’ve applied to register your trademark, and you’re waiting to hear back from the USPTO. If the examining attorney doesn’t raise any objections or if you successfully overcome any objections, then your mark will get the green light for publication in the “Official Gazette” – the USPTO’s weekly publication.

Exciting news, right? But wait, there’s more. After your mark is published, you have a 30-day window where anyone who thinks they might get hurt by your registration can file an opposition to it. It’s like a court proceeding, but instead of a judge, the Trademark Trial and Appeal Board (TTAB) will hear the case.

Assuming everything goes smoothly and no one opposes your mark or you win the opposition, your application will move on to the next stage. It’s worth noting that it can take a few months after publication before you get official notice of the next status of your application.

If your rebuttal fails to vanquish all opposing arguments, the scrutinizing lawyer will deliver a resolute refusal of office action. Should you find yourself at odds with the final denial, fear not! For an added fee, you may take your case to the TTAB and appeal the decision.

Here you have it! Your registered trademark!

 

Step 5: Maintaining Registration

In just about two months post-SOU approval, the USPTO will shoot out registration for you! But don’t get too comfy just yet. To keep that registration on the up and up, you’ll need to file some specific maintenance documents. Fail to do so and your registration could go belly up. If that happens, it’s back to square one, my friend. You’ll have to file a fresh application and start the whole process over again. And just because your mark was previously registered doesn’t guarantee a free pass on the next go-round.

Protect Your Rights From Infringement

If someone is infringing on your trademark, it’s your responsibility to take legal action to stop them. Because here’s a friendly reminder: the USPTO won’t be snooping around to make sure nobody else is using your mark. However, they’ll do their best to prevent anyone from getting a federal registration for an identical or similar mark that’s related to your goods or services. Don’t worry though, if you suspect your trademark is being infringed upon or might be in the future, you can record it with U.S. Customs and Border Protection through its e-Recordation application. Stay vigilant, trademark owner!

 

Conclusion: Best Practices For Trademark Registration Online

why bother registering your trademark? For one, it gives you legal protection against anyone else using a similar mark. It also adds value to your business, making it more attractive to investors, licensors, and potential buyers. Plus, it helps build brand recognition and loyalty among your customers.

Now, the process of registering a trademark can be a bit daunting, with its legal jargon, paperwork, and fees. But fear not! With the help of a qualified attorney or online service, you can navigate the process smoothly and efficiently.

So, are you ready to take the plunge and register your trademark? Don’t wait any longer – the sooner you do, the sooner you can reap the benefits. Get ready to stand out from the competition and protect your valuable brand identity.

Trademark registration can get you more trust from your customers and also generate extensive revenue. However, to manage the extra revenue you will need robust accounting software. Find out how ProfitBooks can solve this problem without having you spend any money! Create your account for free today.

 

Also read:

Trademark Registration Online Easy Process In India

WhatsApp Green Tick Verification Process In 5 Easy Steps

Best Brand Protection Practices For Small Business Owners

10 Funding Options To Raise Startup Capital For Your Business

How To Get Working Capital Loans In India

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WhatsApp Green Tick Verification Process In 5 Easy Steps https://profitbooks.net/green-tick-verification-whatsapp-online-free/ https://profitbooks.net/green-tick-verification-whatsapp-online-free/#respond Mon, 15 May 2023 12:00:26 +0000 https://profitbooks.net/?p=21636 Whenever you come across a business WhatsApp account, you’d generally be more trustworthy towards the companies that are verified businesses. You must have noticed a green tick after the company name displayed on WhatsApp. This badge of honor is an indication of the business is an official business account. And it also gains tremendous trust…

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Whenever you come across a business WhatsApp account, you’d generally be more trustworthy towards the companies that are verified businesses. You must have noticed a green tick after the company name displayed on WhatsApp. This badge of honor is an indication of the business is an official business account. And it also gains tremendous trust from your potential or existing customers.

What does the green tick verification do besides gaining trust?

How to get this green tick? Is the verification limited to specific industries?

Do I fulfill the requirements for it?

These questions (and many more in our FAQ section below) will all be answered in our guide here. We have listed down the entire process into five simple steps so you get what you need to know, so you can get the green tick verification for your business as well!

 

WhatsApp Green Tick Verification: What Is It & Who Gets It?

There are two types of Business accounts; a ‘Business Account’ which is the WhatsApp Business App that anyone can use and is advisable for any business owner to use (in case you’re not already using it). And the other is the ‘Official Business Account’ which gets two special treatments:

  1. the green tick verification
  2. and the company name is visible to people regardless of whether they have saved it in their phone contact
If you’re a business owner who isn’t using this already, you can learn how to use WhatsApp Business effectively. You can apply for the verification process after that.
The best would be to take our own example.
ProfitBooks WhatsApp Green Tick Verification

ProfitBooks WhatsApp Green Tick Verification

In the image above, you see that our company name has a green tick next to it. Also, when I texted the official contact, I got an instant reply. You can also see the two options; ‘Yes, I need help,’ and ‘No,’ right below the reply I received. This doesn’t happen when you chat with a friend.

It is these little things that make all the difference in business professionalism.

Take a look into the difference between a regular Business API and the Official Business API.

Official WhatsApp API With Green Tick Verification

Official WhatsApp API With Green Tick Verification

Apart from the minor visual difference of the green tick, the official API also has tons of extra features as we’ve mentioned later in this article. However, in the verified account the messages are sent automatically which results in a seamless customer experience. This is crucial for gaining the ultimate trust of your customers.

WhatsApp API Without Green Tick Verification

WhatsApp API Without Green Tick Verification

A regular WhatsApp Business Application can be downloaded by anyone and does not have any automation features that the official API has. However, if you are using the regular application on your phone, anyone in business should use this instead of the regular application.

Note that using the official API or having the green tick verification is only for businesses and not for individuals, freelancers, or influencers. Only registered businesses can apply for this.

 

Pros & Cons Of Being An Official Business

When we talk about the pros & cons of being a verified business, we mean that the company account will be an official WhatsApp API. There are unofficial or third-party APIs as well that will do the job of sending automated messages, following up with your clients, etc, but you will not get the green tick verification.

With that in mind, let’s explore the exciting perks and pitfalls of becoming an official business with the coveted green tick verification:

 

Pros:

  1. Trust is a Must: Verified businesses automatically become more trustworthy to their customers, who feel safe knowing they’re not getting swindled by a potential scammer.
  2. Stand Out in a Crowd: With the green tick verification, your business becomes more visible and easier to find for potential customers. That’s what we call winning!
  3. Advanced Features at Your Fingertips: The API comes with some nifty automation tools and other features that verified accounts can use to streamline their messaging game and interact with customers more efficiently.
  4. Better Customer Support: WhatsApp Business lets you resolve customer queries faster, leading to higher customer satisfaction and retention rates. And who doesn’t love happy customers?

Cons:

  1. Privacy Concerns: WhatsApp has faced scrutiny in the past regarding its privacy policies, and some customers may be hesitant to communicate with businesses on the platform due to concerns about their personal information. This can be a downside for businesses that heavily rely on this app for customer communication and may need to address these concerns to maintain customer trust.
  2. Not Available Everywhere: Unfortunately, green tick verification isn’t available in all countries, which can limit the reach of some businesses that rely on it for communication.
  3. Suspension Risk: If a business account violates the terms of service or community guidelines, it may get suspended or deactivated, which can put a real damper on things.
  4. Limited Messaging Control: Some automation features with the official API may be restricted, limiting your control over messaging. You may even get better features from some third-party API compared to the official one.

Overall, the advantages of having a green tick verification for a business usually outweigh the potential disadvantages, as it can improve credibility, customer trust, and communication, which can lead to increased business success.

 

5 Simple Steps To Apply For A Green Tick Verification On WhatsApp

The entire thing is a very simple process and can be done fully manually. We have laid the process down in five easy steps, and by the end of the guide, you will have the green tick badge of trust in no time!

Now there are two ways of getting verified as an official business. You can either go through a WhatsApp Business Service Provider (BSP), of which there are plenty online. Or you can do it manually. We will mainly discuss the manual process of green tick verification in this article.

However, to obtain the green tick verification, you can opt to utilize the services of a Business Solution Provider (BSP) to initiate the verification process.

The BSP will take charge of collecting all the required documents and information, verifying the account, and submitting the request to WhatsApp for review. Following submission, they will carefully evaluate the request to ensure that all requirements are met before granting the verification.

Applying for the verification yourself is the recommended process. This is because you will be a part of the entire procedure and will get a better understanding of the subject. While using a BSP can be tempting, taking the time to apply for verification manually allows for a more personal touch and showcases the business’s commitment to excellence.

Follow these simple steps to manually apply for official business account status:

 

Step 1: Access Business Settings in Facebook Business Manager

First, log in to your Facebook Business Manager account and click on the “Business Settings” button. Facebook Business Manager also comes under Meta now, and these business tools are tools by Meta. This is what the updated page looks like;

Facebook Business Manager by Meta

Facebook Business Manager by Meta

 

Step 2: Choose The Right Account for Verification

After clicking on “Business Settings”, you will see a list of accounts.

From there, you should select “WhatsApp Accounts” which will take you to a page where all your accounts associated with your Business Manager will be listed. If you have multiple accounts, don’t worry! You can select the specific account that you want to apply for verification for.

This step is crucial as it ensures that the verification process is completed for the correct account and you don’t accidentally apply for verification for the wrong one.

Step 3: Contact WhatsApp Experts for Application Support

Now that you’ve selected your desired account, it’s time to take the next step in the application process. Click on the “Settings” button to bring up the various options available for your account. From there, you’ll see the “Contact Support” button which you’ll want to hit to get in touch with the experts.

Step 4: Requesting Official Business Account Status on WhatsApp (& All Meta Platforms)

On the contact support page, you will see an “Ask a question” at the top-right corner of the page. Click on that and select “WABiz: Request official business account status” as the category. This will prompt the system that you are requesting official business status, which will reflect in the entire Metaverse, meaning all of Meta’s apps with a business profile.

Step 5: Completing Verification Request on Business Manager

Finally, fill in all the required information and wait for the request status to appear under the “Direct support” option in your Business Manager. Keep checking the direct support option to see if your request has been approved in the request status.

Keep in mind that while filling in the required information to prove your entity as an official business, the specific documents required may vary, depending on your company registration. However, the common documents that all businesses have to submit include:

  • Business registration documents: a business license or registration certificate issued by the government.
  • Tax registration documents: a tax ID number, GST number, or VAT number.
  • Proof of ownership: proof of ownership of the business, such as a partnership deed, memorandum of association, or articles of incorporation.
  • Business address proof: a utility bill or lease agreement that shows the address of the business.
  • Identity proof: a government-issued ID card, such as a passport or driver’s license, for the business owner or authorized representative.
  • Website or social media profile: Some countries may require a website or social media profile associated with the business.

We know applying for official business account status may seem daunting, but with these easy-to-follow steps, you’ll be well on your way to reaching a wider audience and expanding your business’s reach. Happy applying!

 

Conclusion

To wrap things up, the green checkmark confirmation is a must-have perk for companies that are eager to win over the faith and assurance of their potential or existing customers. Despite a few privacy concerns and messaging constraints, the advantages of sporting the green checkmark far outweigh any cons.

Our five-step process to manually apply for this coveted badge is simple, so companies can flaunt it to their patrons with pride. Get ready to wow your customers with this nifty addition!

But yes, we understand that you still may have some burning questions. Feel free to explore the frequently asked questions section in which we have scavenged the internet to find the most popular questions that people had during the verification process.

WhatsApp marketing can bring you more deals and cash flow. However, you will need robust accounting software to manage your finances this can bring. Find out how ProfitBooks can solve this problem without having you spend any money! Create your account for free today.

 

Frequently Asked Questions (FAQs)

Q1. What are the eligibility criteria to get a green badge?

A1. Following are the criteria your business needs to fulfill before getting the green badge from WhatsApp:

  • You must be using the official WhatsApp Business Account
  • Facebook must verify the Facebook Business Manager account
  • Must be a business (Individuals are not allowed as of now)
  • Recommended you already are running campaigns on the application
  • Must be a reputable brand

Q2. How long is the process of getting the green badge?

A2. The Green Tick applications are usually processed within 1-2 business days, but in rare cases, it may take up to a week. In the case where you’re unsure whether your business has been approved, please contact support until you get a response.

Q3. How can I fasten up the process of getting verified?

A3. Follow these three things to get the verification faster and also to increase the chances of getting verified in the first place.

  1. Having a robust and active social media presence can significantly increase your chances of getting verified.
  2. Being featured in reputable publications or media outlets can help establish your brand’s credibility and increase your chances of getting verified. This can include press mentions, interviews, or guest posts.
  3. Provide accurate and up-to-date information: Ensure that your profile information is accurate and up-to-date, and matches your website and other online profiles. This can include your website URL, bio, and contact information.

Q4. Which businesses are not eligible for green tick verification?

A4. WhatsApp’s API does not allow certain types of businesses to obtain the coveted green tick. Companies involved in the sale or promotion of drugs, tobacco, gambling, alcohol, weapons and ammunition, live animals, adult products/services, medical and healthcare products, dating services, and cryptocurrencies are ineligible.

You can read WhatsApp’s Commerce Policy for complete knowledge in this regard.

Q5. What should I do now that my verification application has been rejected?

A5. If your WhatsApp green tick verification application gets rejected, don’t worry too much.

The first thing to do is to check the reasons for the rejection and make sure you address them in your next application. Remember, the green badge is only a visual indicator that makes your profile look more official to customers, but you can still run campaigns and support customers without it.

So, don’t let the rejection discourage you, and feel free to reapply after 30 days.

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How to record Loan Transaction? https://profitbooks.net/record-loan-transaction/ https://profitbooks.net/record-loan-transaction/#comments Thu, 23 Jul 2015 10:44:55 +0000 https://profitbooks.net/?p=14554 One of the most popular methods of financing is borrowing. Loans can be short term, long term, secured, or unsecured and should be recorded accordingly. It is important to keep track of the principle and interest amount, and record them respectively in books for correct accounting. Classification is vital as ‘interest’ paid on loan is…

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One of the most popular methods of financing is borrowing. Loans can be short term, long term, secured, or unsecured and should be recorded accordingly.

It is important to keep track of the principle and interest amount, and record them respectively in books for correct accounting. Classification is vital as ‘interest’ paid on loan is an expense incurred to avail the loan, whereas principle repayment is nothing but repayment of the amount borrowed.

Going by the golden rule of accounting for personal accounts, you should debit the receiver, and credit the giver. The same can be done by passing a journal entry.

There will be two aspects as far as the accounting is concerned.

  1. Recording the loan/borrowing in the books, And

  2. Recording the repayment of the same in the books,

 

Before recording transactions, you will have to create the following A/c Heads:

1) ‘Secured/Unsecured Loan’  under A/c Group – ‘Current/Non Current Liability’  (Depending on the nature of the loan)

Create new loan account

 

2) Similarly, also create ‘Interest on Loan’ Under A/c Group – ‘Finance Expenses’

 

Let’s discuss these aspects in detail now.

1) Recording loan transaction.

Make a journal entry debiting the Bank A/c as we have received the money, while crediting the say, ‘Unsecured Loan A/c’ created earlier.

Loan Transaction

 

2) Recording repayment of the same i.e. installments

  • First step is to bifurcate the principle and interest amount.
  • Now, since we are making the payment, go to Expenses–> Make payment.
  • Select the bank from which you are making the payment of installment, in the ‘Pay From’ field.
  • Under Pay to, select ‘Unsecured Loan’ and enter the principle amount. This will ensure that the loan is reduced by the amount you have repaid.

Record EMI Payment
3) Then repeat the process and pass another entry, this time select ‘Interest on Unsecured Loan’ A/c and enter the amount of interest paid.

One must always keep in mind that the crux of Accounting is to record the transactions as they happen in a way that reflects the true and fair financial position of the company.

 

Also read :
How to record credit card transactions in ProfitBooks.
How to account for owner’s contribution in business.

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