Regarding journal enteries

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Querist : Anonymous

Querist : Anonymous (Querist)

18 June 2016 A Proprietorship firm take a loan from bank. for bank loan bank open new account & credit loan amount in new a/c. now the question arises what is the entry for that transaction ???????????
bank A/c Dr.
To _________________
what is the entry in case of loan repayment ??????????

Amol S Joglekar

Amol S Joglekar (Expert)
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18 June 2016 for loan credited in new account
debit bank account
credit Loan account

for interest
debit interest on loan
credit Loan account

for repayment
debit Loan account
credit bank/cash as the case may be

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Kaushik Joshi

Kaushik Joshi (Expert)
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18 June 2016 yes I agree with Amol Sir. here bank account is asset, loan account is current liability or term loan as case may be, and interest on loan is expense.

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Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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20 July 2025 Great question! Here's how to pass journal entries for a bank loan taken and its repayment in the books of a proprietorship firm:

✅ 1. At the time of receiving the loan:
The bank credits the loan amount to a loan account they create for you. You (the firm) receive the amount in your bank account.

🔹 Journal Entry:

Bank A/c Dr.
To Bank Loan A/c
(Being loan amount received from bank)
Bank A/c: Asset increases (Debit).
Bank Loan A/c: Liability increases (Credit).
✅ 2. At the time of loan repayment (Principal only):
🔹 Journal Entry:

Bank Loan A/c Dr.
To Bank A/c
(Being repayment of loan principal)
Loan A/c: Liability decreases (Debit).
Bank A/c: Asset (cash) decreases (Credit).
✅ 3. If interest is also paid:
Assume you're paying ₹10,000 as principal and ₹1,000 as interest.

🔹 Journal Entry:

Bank Loan A/c Dr. ....................10,000
Interest on Loan A/c Dr. ...........1,000
To Bank A/c ..................................11,000
(Being repayment of loan and interest)
Loan A/c: Liability reduced.
Interest A/c: Expense booked.
Bank A/c: Cash outflow.

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