Forum Discussion

Experienced User

5 years ago

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
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.

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
  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
    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