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<p>Bank A/c Dr1000</p> <p>Interest on termloan(deffered) Dr100</p> <p>Administration Charges a/c Dr5</p> <p>To Long Term Loan 1105</p> <p> </p> <p>or</p> <p> </p> <p>Bank A/c Dr1000</p> <p>To Long Term Loan 1000</p> <p> </p> <p> </p> <p>Administration Charges A/c Dr5</p> <p>To Bank 5</p>
Example: You received loan on1-1-2014 25000 and interest rate is10% PA. You have to pass entry as follows
Date:
Bank Account Dr 25,000.00
To Bank Loan Account 25,000.00
Date: Interest Entry
Interest on Bank Loan A/C Dr 208.33
To Interest Outstanding A/C 208.33
While loan receiving time we getting only loan amount. Thats why we need only to enter loan amount. Because that time interest not starting. Interest only you have to enter while interest expiry time.
To record the long term loan the following entry is done:
Dr. bank a/c (current A/C) Dr, interest expense ( for the current period)
Cr. bank A/C (LTLoan) Cr. Interest Accrued
where interest Accrued will be accounted for at the end of each year till the end of the period of the loan
At the time of recieving the loan into your account the entry will be:
Bank A/c dr
Loan Processing Charges Dr.
To Bank Loan Account CR
As and wehen any installment paid the following entry needs to be passed:
Bank Loan A/c
Interest Expense
To Bank Account
cash a/c dr
To LOan A/c
Bieng cash recieved cash account debited and loan account is credited
Cash Or bank recorded on debit side and loan is posteed on creidt side.
As
cash/Bank
To Loan
want to debit cash/bank a/c and credit loang term loan (liability) a/c
It would be better to maintain the Mirror account as reflected in the Books of the Banker. All incidental charges, like processing, stamps other charges including regular interest are generally charged by the banker first to the Loan account and recovered from their current/cash credit or overdraft account.
The reflections of all charges in the same account is more convenient to know the history of the account in its very detail for any time reference. Better follow that practice. Better maintain a mirror account to reflect the same transaction details as of the Banker.
cash Dr
Loan Cr
cash/bank A/c
loan term loan {Liability} A/c
Debit to Cash in bank and a credit to Long Term Loan accounts, respectively.
