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How to Prepare a Loan Journal Entry

Andreas August 2, 2022 2 min read

A loan journal entry records the expenses incurred to repay a loan. A loan can either be current or long-term. In either case, the Debit column should be equal to the Credit column. In the end, the loan is recorded in the books of the company. The following steps guide you through the process of recording a loan.

First, you will need to make an entry in the loan account. This account will include interest that you paid on the loan and is offset against your cash. This entry is done in the “background” of the software. In addition, you can use the invoicing/billing features of bookkeeping software to record your loan acquisition.

Similarly, you will need to record your cash down payment on the loan. Most loans will include this amount in the initial balance of the loan. Recording a check for that cash will bring the loan balance to the amount shown on the loan documentation. Once you’ve completed this process, you can complete the rest of the loan journal entry.

You can also download a copy of Interest Payable On Loan Journal Entry PowerPoint slide. This slide is fully customizable and showcases three stages of the loan journal entry. You can customize it to fit your presentation. This presentation slide is available in standard screen and wide screen aspect ratios, as well as in a widescreen format.

As the loan balance continues to increase, it is reflected as a liability in the loan journal entry. Similarly, capitalized interest is also added to the balance of the loan and is an expense on the books. If you wish to defer payments, you can postpone interest payments until you can make your payments.

A loan journal entry is not too complicated to prepare. It consists of recording the amount borrowed and the amount paid back each month. You should compare this amount to your loan account each month. This will give you a better idea of the amount you will need to repay each month. For example, if you purchased a car for $15,000, you would record a $15,000 loan entry for it. The loan amount would be $15,000 and the amortization period would be five years.

When repaying a bank loan, the business owner must record both the amount of money you receive and the amount you owe. The loan liability will depend on the repayment schedule agreed upon between you and the lender. A short-term loan will be recorded as a current liability, while a long-term loan will be recorded as a long-term liability on the balance sheet.

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