Accrued Interest to Loan account
Hi,
We have the Directors Loan with accrued Interest.
To record to the General Journal with a credit to the loan account and a debit to an expense account ( Loan Interest)
My question is: to process the expense account (debit) will be an expense to the Company for the financial year. As we are not in a position to make payment for the accrued interest yet, is there a way not to show it as an expense? can that be located to a different account??
Hope to hear for a response soon. Thank you
Kind Regards
Fran
Hi Fran_29 , it is correct to show the interest as an expense, as it relates to the period. The credit to the loan account shows that the business owes that amount, and it will remain there until it can be paid. The payment will debit the loan account, reducing the balance.
