Journal entry against Loan taken against Term Deposit
This query is : Resolved
15 March 2025
How to make Journal entry of Loan taken against term Deposit.
12 August 2025
Got it! When you take a loan **against a Term Deposit (TD)** as collateral, here’s how to record the journal entries:
---
### 1. **On taking the loan against Term Deposit:**
You receive loan proceeds in your bank account, but your Term Deposit is pledged as security.
| Account | Debit | Credit |
| --------------------------- | ------------ | ------------ |
| Bank Account | ₹Loan Amount | |
| To Loan Account (Liability) | | ₹Loan Amount |
**(To record receipt of loan amount against pledged Term Deposit)**
---
### 2. **To record the Term Deposit pledged as collateral (No entry needed for TD itself, as it’s already recorded).**
Just a note in the ledger/notes for pledge:
* **No accounting entry is passed for pledge itself**, but it should be disclosed as a contingent liability or memorandum note in the books.
---
### 3. **On repayment of loan:**
| Account | Debit | Credit |
| --------------- | ---------- | ---------- |
| Loan Account | ₹Repayment | |
| To Bank Account | | ₹Repayment |
---
### 4. **Interest on loan (when paid):**
| Account | Debit | Credit |
| ------------------------ | --------- | --------- |
| Interest Expense Account | ₹Interest | |
| To Bank Account | | ₹Interest |
---
### Summary:
| When loan received | Debit Bank Account; Credit Loan Account |
| --------------------- | ------------------------------------------- |
| Term Deposit pledged | No accounting entry, note disclosure |
| Loan repayment | Debit Loan Account; Credit Bank Account |
| Interest paid on loan | Debit Interest Expense; Credit Bank Account |
---
Let me know if you want me to tailor this with numbers or any special scenario!
---
### 1. **On taking the loan against Term Deposit:**
You receive loan proceeds in your bank account, but your Term Deposit is pledged as security.
| Account | Debit | Credit |
| --------------------------- | ------------ | ------------ |
| Bank Account | ₹Loan Amount | |
| To Loan Account (Liability) | | ₹Loan Amount |
**(To record receipt of loan amount against pledged Term Deposit)**
---
### 2. **To record the Term Deposit pledged as collateral (No entry needed for TD itself, as it’s already recorded).**
Just a note in the ledger/notes for pledge:
* **No accounting entry is passed for pledge itself**, but it should be disclosed as a contingent liability or memorandum note in the books.
---
### 3. **On repayment of loan:**
| Account | Debit | Credit |
| --------------- | ---------- | ---------- |
| Loan Account | ₹Repayment | |
| To Bank Account | | ₹Repayment |
---
### 4. **Interest on loan (when paid):**
| Account | Debit | Credit |
| ------------------------ | --------- | --------- |
| Interest Expense Account | ₹Interest | |
| To Bank Account | | ₹Interest |
---
### Summary:
| When loan received | Debit Bank Account; Credit Loan Account |
| --------------------- | ------------------------------------------- |
| Term Deposit pledged | No accounting entry, note disclosure |
| Loan repayment | Debit Loan Account; Credit Bank Account |
| Interest paid on loan | Debit Interest Expense; Credit Bank Account |
---
Let me know if you want me to tailor this with numbers or any special scenario!
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