HOW TO MAKE JOURNAL ENTRY OF LOAN IN ACCOUNTING

HOW TO MAKE JOURNAL ENTRY OF LOAN IN ACCOUNTING

Loan is a liability for business hence f has to pay . It is accounting entry where loan is credited a sits liability to show in books of accounts and when loan is paid loan account is debited to adjust the loan paid

Example Amar Traders took a loan of Rs 100000 .

Journal entry for the same will be

Particular

Amount

Bank A/c dr

 

100000

  To loan A/c

  100000

Being loan taken from bank

Next when its installment will be due and paid

Now Amar pay the installment of loan every month like in first month he pay Rs 5000 loan amount and Rs 7000 interest on loan therefore he has to first make due entry and then paid the interest and loan amount.

Particular

Amount

Loan A/c Dr.

5000

Interest on loan A/c Dr.

7000

   To loan Payable A/c

      5000

   To Interest on Loan payable A/c

       7000

(being on interest and loan due

 

After making a due entry when loan and interest is paid then in the books of accounts payble interest on loan and loan is debited so they are adjusted and payment is made.

Particular

Amount

loan Payable A/c

5000

Interest on loan Payable A/c Dr.

7000

            To bank a/c

    12000

  

 

(being on interest and loan due paid

 

Another example of understanding of loan .

Another example of understanding of loan .

Suppose A ltd took loan from bank on 1 Dec 2020 Rs 100000 and interest payable Rs. 12,000 financial  year closed on 31 March 2021.

Case 1

Interest paid Rs 2000

Interest on Loan A/c Dr.   2000

To Bank A/c   2000.
(Being interest on Loan paid)

Interest on Loan A/c Dr 2000

Interest on Loan payable A/c Dr 2000

(being interest on loan due)

Case 2

Interest paid Rs 8000

Interest paid Rs 8000

Under such condition our liability is to paid Rs 4000 but we
paid Rs 8000 means we paid loan in advance under such condition journal entry
for the same will be.

Particular

Amount

Interest on loan  A/c Dr.

8000

     To bank a/c

  8000

        

   

  

 

(being on interest and loan paid)

 

 

Particular

Amount

Prepaid Interest on loan  A/c
Dr.

4000

     To Interest on loan  

  4000

         (being on interest and
loan paid)

   

here 

Case 3

No Interest paid

Under such condition we have to make a entry of Rs 4000 in our books as interest payable

Particular

Amount

 Interest on loan  A/c Dr.

8000

     To Interest on loan  payble

  8000

         (being on interest on loan payable)

   

 

 

 

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