Regarding journal enteries
This query is : Resolved
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 ??????????
bank A/c Dr.
To _________________
what is the entry in case of loan repayment ??????????
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
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
Message likes :
1 times
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.
Message likes :
1 times
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.
✅ 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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