Guy I used to work with took over a small local company. I do payroll stuff, not bookkeeping, but work in quickbooks a little bit... so he asked me a few questions...

he and his wife have started setting their books up and have a lady coming out to do their tax prep but she asked them about what they already have input. She told them their loan payment is in as an expense not an equity. He's only asking me how to change it in quickbooks, not what's correct. Now the quickbooks version I'm used to working with has the account menu of what to code checks out and deposits in as. His online basic version has preset accounts of what to code things as and only two options as equity, the loan payment option which they selected is auto populated as an expense.

I'm pretty sure it should go in as an equity like their tax lady is saying, yes? And as such, is that quickbooks version just too basic? Thoughts ? - other than I'm in over my head and not much help to Him but he's a good guy and starting out so I don't want to recommend a $125 / hr cpa to help with their basic set up.

Simple way to look at it. If it is something that they have to pay money for/on then it is an expense. At least that is what I remember from an accounting class long time ago.

I'm not exactly sure what their lady is saying but a car purchase with a loan generally works like this.

Original purchase
Debit car $10,000 (asset)
Credit cash $1,000 (asset)
Credit note payable $9,000 (liability)

Loan payments
Credit cash $1,000 (asset)
Debit note payable $750 (liability)
Debit interest expense $250 (expense account from income statement that rolls into owners equity as retained earnings)

Depreciation of car
Credit accumulated depreciation $500 (contra asset)
Debit depreciation expense $500 (expense account that rolls into owners equity)

I didn't look but I'm thinking they didn't really set up their loan at all, just have payments showing being made on it so they'll need to go back and set up the loan as a liability to be paying against