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\

When Loan is taken from Bank

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 is 12000 which include interest on loan Rs 7000 and Loan Rs 5000. 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.

Loan and its interest payable entry

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 .

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

If interest paid Rs 2000

Interest on Loan A/c Dr. 4000

To Bank A/c 2000.

To Interest on Loan payable A/c 2000

(Being interest on Loan paid)

Case 2

If 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

If 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)