WE HAVE A CC A/C IN BOI AND WE HAVE TAKEN A TERMLOAN
SO,NOW I WANT TO KNOW ABOUT THE TERM LOAN SANCTIONED ENTRY
AND TERM LOAN COMES UNDER LOANS & LIABILITY
Moosa Tamijuddin
(Finance and Project Controller)
(108 Points)
Replied 03 July 2016
Normally Banks provide Companies with Overdraft and Term Loan facilities to make interest earnings from them. When BOI has sanctioned a term loan to your Company, Debit Bank account and Credit Loans Payable under Current Liabilities with the Loan amount sanctioned. Take the loan period , say, 3 year or 5 years (36 or 60 months) into consideration while making your account entries. If the Bank has provided EMIs with interest amounts therefor, make the following entries every month:
Loan EMI amount (Loan account) ....DEBIT
Interest on EMI amount (Expenses)......DEBIT
Accounts Payable ... Total amount.......CREDIT
These entries could be made Accruals every month for one full year. On the due date of the loan EMI, the bank will automatically debit your CC account and credit your loan account. Entries in your book should be ACCOUNTS PAYABLE ..dr To BANK ACCOUNT ..cr
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