double entry for loan interest?

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:28AM in AAT student discussion
Hi all,<BR>Whats the double entry for loan interest?<BR>I always thought it was: <BR>DR loan interest<BR>CR Loan a/c<BR>Someone told me accruals were involved???<BR>Anyone got any ideas?<BR>

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    double entry for loan interest?

    Hi there,<BR><BR>we accrue for bank interest:<BR><BR>dr p&l<BR>cr accruals<BR><BR>but ours is an intercompany loan, so may be different<BR><BR>try the forum at www.trainee-accountant.co.uk<BR><BR>cheers
  • System
    System Posts: 100,534 🤖 Admin 🤖
    double entry for loan interest?

    I take it this is loan interest paid<BR>Wouldnt that be DR loan interest & Cr Bank.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    double entry for loan interest?

    It is debit loan interest, credit loan account as the bank payments would have gone into the loan account as a whole. This journal just separates the capital repayment and the interest part. Also the accruals part is that interest may be charged 6 monthly and not be charged by the time the accounts are done so you must accrue for that charge.<BR><BR>If you need a better explanation (I know it's a bit garbled) then please ask again or email me (address in profile).<BR><BR>Annette
  • System
    System Posts: 100,534 🤖 Admin 🤖
    double entry for loan interest?

    Hi all,<BR>Annette was closest - now identified as an unusual loan with no capital repayments. Resolved as follows: bi-annual payments of interest are debited to a loan interest expense account and the loan capital a/c remains static. This scenario gives rise to the possibility of an accrual at the year-end in the normal way of expenses. Nothing exciting but I had never encountered such a loan. <BR>Thanks for your swift replies.

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