Question

journal entry for interest paid on loan of ₹200​

Answer 1

Answer:

Hope this helps you ??

Explanation:

Finance  

Ratios

Finance Terms

Forum  

Home/Journal Entries/Accounting and Journal Entry for Loan Payment

Accounting and Journal Entry for Loan Payment

Journal Entry for Loan Payment (Principal & Interest)

Loans are a common means of seeking additional capital by the companies. They can be obtained from banks, NBFCs, private lenders, etc. A loan received becomes due to be paid as per the repayment schedule, it may be paid in instalments or all at once. Below is a compound journal entry for loan payment made including both principal and interest component;

Loan A/C Debit Debit the decrease in liability

Interest on Loan A/C Debit Debit the increase in expense

To Bank A/C Credit Credit the decrease in Asset

*Assuming that the money was due to be paid to ABC Bank Ltd.

Traditional Rules Applied

Loan Account (Personal) – Debit the Receiver

Interest Account (Nominal) – Debit all Expenses & Losses

Bank Account (Personal) – Credit the Giver

The repayment of a secured or an unsecured loan depends on the payment schedule agreed upon between both the parties. A short-term loan is categorized as a current liability whereas the unpaid portion of a long-term loan is shown in the balance sheet as a liability and classified as a long-term liability.

 

Example