Term loan

Normally Banks provide Companies with Overdraft and Term Loan facilities to make interest earnings from them.  When BOI has sanctioned a term loan to your Company, Debit Bank account and Credit Loans Payable under Current Liabilities with the Loan amount sanctioned. Take the loan period , say, 3 year or 5 years (36 or 60 months) into consideration while making your account entries.  If the Bank has provided EMIs with interest amounts therefor, make the following entries every month:

Loan EMI amount (Loan account)     ....DEBIT

Interest on EMI amount (Expenses)......DEBIT

Accounts Payable ... Total amount.......CREDIT

These entries could be made Accruals every month for one full year. On the due date of the loan EMI, the bank will automatically debit your CC account and credit your loan account. Entries in your book should be  ACCOUNTS PAYABLE ..dr To BANK ACCOUNT ..cr