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Margriet's avatar
Margriet
Experienced Cover User
4 years ago
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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
    4 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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  • jenniek's avatar
    jenniek
    Ultimate Partner
    4 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 Cover User
      4 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
        4 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