Question

paid interest on loan rupees 500

Answer 1

Given "Business commenced with 75000..paid expenses 2000"

this transaction affects two accounts... cash a/c(cash is paid) .cash a/c is a real account(all assets and liabilities come under it..here cash is an asset)
interest on loan a/c is a nominal account(all expenses incomes gains losses come under it)

the three golden rules of accounting are

personal account - debit the reciever, credit the giver

nominal account- debit all expenses and losses, credit all incomes and gains

real account- debit what comes in, credit what goes out

so in contention with the above rules... Interest on loan a/c being expenditure should be debited and cash should be credited..

so the journal entry will be


Loan a/c Dr 500

To interest on loan a/c Dr 500

(being Interest amount due on loan)


interest on loan a/c Dr 500

To cash a/c 500

(being interest on loan paid)