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Business loan accounting entries

RAVIKUMAR (STUDENT) (107 Points)

16 August 2016

Business obtains bank loan 100,000 at 6% interest flat yearly. Loan period is for three years. EMI is 3277.77. What would be entries when loan amount is credited in the account and what entries for emi every month.

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6 Replies

VIJAY KUMAR (Audit Assistant) (22 Points)
Replied 16 August 2016

Principal amount Dr

interest amount Dr
to Loan a/c.

Anantharaj (Accountant) (32 Points)
Replied 30 August 2016

What would be entries when loan amount is credited in the account

Bank Account... Dr

To Loan Account... Cr

and what entries for emi every month

Interest account...Dr

To TDS Account...........Cr

To Creditor (loan provider) Account..........Cr

Creditor A/c.......Dr

To Bank A/c..........Cr

Amit Kumar (MBA finance) (37 Points)
Replied 08 August 2017

One of the most popular methods of financing is borrowing. Loans can be short term, long term, secured, or unsecured and should be recorded accordingly.

It is important to keep track of the principle and interest amount, and record them respectively in books for correct accounting. Classification is vital as ‘interest’ paid on loan is an expense incurred to avail the loan, whereas principle repayment is nothing but repayment of the amount borrowed.

Going by the golden rule of accounting for personal accounts, you should debit the receiver, and credit the giver. The same can be done by passing a journal entry. Now you can keep track all the things via business loan app from lendingkart.

nitya sharma (2 Points)
Replied 10 January 2023

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