Journal Entry for Loan

When a company borrows money by taking out a loan, the borrower debits the cash account (an asset) and credits either loan payable or note payable (a liability). The lender would debit loan receivable and credit the cash account.
When interest is accrued on the loan, the borrower must record interest expense and credit interest payable (or credit the cash account if the interest is paid immediately). The lender would debit interest receivable (or the cash account) and record interest revenue.
When the loan is repaid, the borrow should (1) record interest expense for the final period, (2) debit interest payable for any previously unpaid interest, (3) debit loan payable, and credit the cash account.
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[@SaaSLTDDeals]

Whoa, breaking down loan journal entries like a pro! The quarterly adjustments make so much sense now. Can't wait to see more financial insights!

[@bordershader]

That was fun! Ha ha! I studied this two years ago so i paused and wrote out what I would do, pleased to say largely the same.
Initial loan receipt, 01/01:
Dr Bank / Cr Loan 5,000
1st, 2nd, 3rd and 4th quarter ends:
Dr Interest /Cr Deferred interest 75
Year end, 31/12:
Dr Deferred interest 300, Dr Loan 5,000/ Cr Bank 5,300.
But of course I could combine the 4th and final 'installment' of interest, with the payment of the full year's interest. And I'm not sure if Deferred interest is the correct name for the account I'd post the credit balances to during the year, but I intend for it to be a liability account, showing up on the BS, in any case!
Thanks, I enjoyed the exercise. Now I can add it to my CPD as well 😅

[@moniquegomez99]

👌☝️Thank You. That’s Good Stuff. I appreciate you sharing. I enjoyed the example. Very Informative and helpful. Easy to understand which is Awesome 😎

[@bordershader]

Oh, and the advert which popped up was for a bra, I'm laughing so much! Just hope it coordinates with the Handerpants!

[@jonnyturtleneck7153]

What is the lender’s journal entry at the signing of the loan agreement but prior to the disbursement of funds?