Journal entry

A/c entries 2958 views 9 replies

hello.... i want to know wat will be the journal entry passed for starting business by taking loan....it shud be cash debit, loan credit..... dat means there will be no capital.... pls answer my query

Replies (9)

The entry is right. But generally banks don't finance 100% for strating a project. But hypothetically if we assume that bank financed 100% then your journal entry is correct:

 

Cash/Bank A/c         Dr.

       To Bank Loan A/c

 

Now when the business will earn profit after allowing all expenses including interest on loan that will form form part of capital and entry will be:

 

Profit & Loss A/c        Dr.

        To Capital A/c

(Being profit transferred to capital)

Hi

I agree with Mr Deepak

Starting the business with cash:

Cash a/c                 Dr.

   To Owner's capital a/c

Starting the business with loan:

Cash a/c                  Dr.

    To Bank  a/c

here, why we are using?

Bank A/c         Dr.

       To Bank Loan A/c

 

 

 

I agree Mr. Deepak

but not agree with umavalli

Here, I am asking

why we are using

Bank A/c         Dr.

       To Bank Loan A/c  Dr.

anyone explain?

Amount will be credited to your bank account and hence you need to debit bank. As amount you have received as loan it should be shown as liability and hence credited to bank loan a/c

 

Regards

Dayananda

 

Bank A/c Dr. To Loan A/c Cr. Reason: here the business is not getting owners equity.

Just one question more, in future years while making repayment of loan taken to start up a business, the loan would be repaid as normally paid as :- 

Interest A/c      Dr.

Loan A/c          Dr.

    To Bank A/c

(Being loan installment paid)

????

So that means when we taken loan from bank to start up a business we pass :-

1. Bank A/c      Dr.

       To Loan A/c

    (Being loan taken from bank to start up a business)

2. All Expenses A/c     Dr.

       To All incomes A/c

       To Profit & Loss A/c

        (Being Profit made during the year)

3. Profit & Loss A/c     Dr.

        To Capital A/c

        (Being Profit during the year has been transferred to Capital A/c) 

and the last one is:-

4. Interest A/c      Dr.     annual interest

    Loan A/c          Dr.     loan repayment

        To Bank A/c           installments

     (Being loan installment paid)

 

Is that all or any more entry also we have to pass????

YES. SUFFICIENT. NOTHING IS REQUIRED ADDITIONAL ENTRIES


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