Past paper Loan Account ?
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Hi Hope you can help
I have just been working on a past paper and one of the questions on there caught me out.
The paper is Planters June 16, it gave me a balance on the Loan Account to post on the trial balance, but i posted it as an expense, but looking at the answers it is a credit balance why is this.
I understand that if you take a loan account this is a liabilty therefore credit balance, and when you pay it back it is debit expenses on the loan payment.
The question was simply a posting, but just so i understand. THANKYOU Zoe
I have just been working on a past paper and one of the questions on there caught me out.
The paper is Planters June 16, it gave me a balance on the Loan Account to post on the trial balance, but i posted it as an expense, but looking at the answers it is a credit balance why is this.
I understand that if you take a loan account this is a liabilty therefore credit balance, and when you pay it back it is debit expenses on the loan payment.
The question was simply a posting, but just so i understand. THANKYOU Zoe
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Comments
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Re:Past paper Loan Account ?
Zoe
The Loan account is a credit as its a liablility - you only debit the account if you pay money out but then you still have a credit balance as presuming you still got part of the loan left to pay out.
So if you had a loan of £5000, paid off £1000,you still have a credit balance of £4000 left to pay.
Hope this helps
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Re:Past paper Loan Account ?
Thankyou for your help, Zoe0