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Margriet's avatar
Margriet
Experienced User
5 years ago
Solved

How do I make journal entry to record interest on bank loan

How do I make journal entry to record interest on bank loan? The monthly payments are recorded in "banking" but that does not reconcile the liability account that I have created for the loan.

  • redmx's avatar
    redmx
    5 years ago

    Apologies - posted b4 I was ready.

     

    Loan account        Debit $800

    Interest Expense    Debit $200

    Cheque Accounrt  Credit $1,000

     

    With a table mortgate the split between repayment on the loan account and interest will change with each payment , so these need editing every payment.

     

    I use recurring journals for splitting things such as phone/internet between business/personal as well as receipts where there multiple splits and an invoce was no previously issued.

5 Replies

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  • jenniek's avatar
    jenniek
    Ultimate Partner
    5 years ago

    Hi Margriet 

    Change the loan liability account to a credit card type - then you can process transactions against it and reconcile it like a bank account. Otherwise you would need to record a journal entry (DR & CR) in Accounts.

  • Margriet's avatar
    Margriet
    Experienced User
    5 years ago

    Hi Jennie,

     

    Thanks for your reply. As payments come out of my cheque account, I would have to record DR/CR journal entries. But how would I structure those?

     

    Kind regards,

    Margriet

  • redmx's avatar
    redmx
    Experienced User
    5 years ago

    For splitting payments such as this I often set up a recurring journal , which I can then easily edit if the amounts change.

     

    For your scenario the journal would have three lines.  If for example the loan payment was for $1,000 , comprising $200 interest and $800 principle (loan repayment) than.

     

    Debit Loan Account  $800

  • redmx's avatar
    redmx
    Experienced User
    5 years ago

    Apologies - posted b4 I was ready.

     

    Loan account        Debit $800

    Interest Expense    Debit $200

    Cheque Accounrt  Credit $1,000

     

    With a table mortgate the split between repayment on the loan account and interest will change with each payment , so these need editing every payment.

     

    I use recurring journals for splitting things such as phone/internet between business/personal as well as receipts where there multiple splits and an invoce was no previously issued.

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