Business loan

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hi

Can anyone out there help me with accounting entries
for a business loan the Balance sheet in particular.

My friend has asked me to help with his books as I'm on matty leave :)
He received a business loan during the year which has all been used up as his only been trading a couple of years.
I have debited P/L with cost of loan during year.
I have split the remaining principle & Interest of the loan into shorterm & longterm liabilities. on the balance sheet but cannot seem to balance. :cry:

can anyone offer a step by step guide as to the balance sheet entries.

Desperately awaiting a reply

Thanks :)


Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Business loan

    you would credit the loan account to be shown in the balance sheet (debit would have been bank entry).

    at the end of the year you would debit the P&L with interest charged and credit the loan account so that the balance in the balance sheet matches the loan amount at that date.

    Missy
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Business loan

    also when you make the repayments from the bank this would debit the loan account.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Business loan

    Missyb

    Thank you so much for your reply but can I just strip things right back a bit to get the full understanding....

    Does the loan account sit in the long term liability section on balance sheet (cause thats where I've put it). can you confirm ? :roll:

    When you say credit the loan account so that it matches the outstanding loan, are we talking solely about the principle element of the loan made during the period? :?

    I am trying to clarify/confirm my understanding of the Accounting treatment and entries for loan interest and the Principal payments and under which headings they sit in the accounts.

    sorry for probing even further but I'm keen to get this just right.


    Thanks again
    :)
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Business loan

    If you email me (my address is in my profile) I can send you a t account of a loan account including interest etc.

    Annette

Categories

Privacy Policy