Journal entry for loan payment and receipt
When a loan is taken
When the loan is taken it a Liability for the firm.
Example: Journal entry for a loan payable
Suppose A purchased a car on loan for Rs 200000 by a firm then the following entry will be the pass.
In this case, loan taken from the bank is a liability for A as he has to pay the money in future.
Car A/c 200000
To Loan A/c 200000
(being car purchased on loan)
Pay Ist instalment of loan which includes 2000 principal amount and 3000 as interest amount.
Therefore the journal entry will be
Loan A/c Dr 2,000
interest on loan A/c Dr 3000
To Bank A/c 5000
(being instalment of loan is given)
Similarly, another instalment is paid to a bank here interest on the loan is the expense of expense for a and Loan is debited to decrease the liability.In this way, we pass the entry every month till the liability of loan is set to nullify.
In this case loan principal amount and interest on a loan is shown separately in books of accounts.
Accounting equation received a loan will be
Asset = Capital + liabilities
car = capital + Loan
200000 = 0 + 200000
200000 = 200000
When the loan is given
When a loan is given then its an Assets for the firm
when the loan is given to the employee
The loan was taken by the employee for purchasing a Car Rs 300000.
In the above transaction loan taken by the employee is an asset for an organization.
Journal entry for the above will be.
Loan took by employee A/c Dr. 300000
To Bank/Cash A/c 300000
(being loan is taken by the employee )
Now employee has to make payment of a loan in 30 equal instalments of 10,000 each if his salary is Rs 40000 the journal entry will be.
Salary A/c 40,000
To Loan taken by employee A/c 10,000
To bank A/c 30,000
(being salary paid to employee and loan adjusted)
Example of Loan repayment.
Ravi took Loan from Rahul for Rs 20000.
The journal entry in the books of Ravi
Cash A/c Dr 20000
To Loan from Rahul A/c 20,000
(being loan was taken form Rahul)
Note: Loan is the liability for Ravi, therefore, its shows Cr balance.
Journal Entry in the book of Rahul
The loan is given to Ravi A/c Dr 20,000
To cash a/c 20,000
(being loan was given to Ravi)
Note: Loan given to Ravi is an asset in the book of Rahul, therefore, it has debit balance when the loan is given
Journal entry for repayment of the loan
Ravi repays the loan to Rahul Rs 20000 and interest amount Rs 2000.
Journal entry in the book of Ravi
Loan form Rahul A/c Dr
To Cash A/c Dr 22000
(being loan repay it, Rahul)
Journal entry in the book of Rahul
Loan payment received with interest 20000 and interest rs 2000.
Cash A/c Dr 22000
To loan Given to Ravi A/c 20.000
To interest on loan A/c 2000
(being loan given received back)
how to make loan entry in tally
Now to make loan entry in tally
Mr Aviansh took the loan from Bank to purchased a Car Rs 400000.
We have to make two ledgers
- Go to the gateway of tally >accounts info >create ledger>Loan from the bank under Loan and liabilities
- Go to the gateway of tally>accounts info >crete ledger > bank under the bank
Go to GOT(gateway of tally>accounting Voucher f6 (receipt)
Avinash pays an instalment of loan Rs 20,000 which include 15000 as a principle and 5000 as interest on Loan.
The journal entry for the same will be
Laon from Bank A/c Dr 15000
Interest on Loan A/c Dr 5000
To bank A/c 20,000
(being instalment of loan is paid )
here interest on a loan is the expense for Avinash, therefore, it will be treated as an Indirect expense in the tally
this entry will be made in accounting Vouchers payment F5
Journal entry of loan in books of borrower & lender
|In the books of the borrower||In the books of Lender|
|When a loan is taken
Bank A/c Dr
To loan A/c
|In the books of the lender
To bank A/c
|When the principal and interest amount is paid
Loan A/c Dr
Interest A/c Dr
To bank A/c
|When interest and the principal amount is received
Bank A/c Dr
To loan A/c
To interest A/c