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Margriet's avatar
Margriet
Experienced Cover 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.

Margriet's avatar
Margriet
Experienced Cover User

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.

    • Margriet's avatar
      Margriet
      Experienced Cover User
      5 years ago

      Thank you very much! So simple.