Sorry, you do not have permission to ask a question, You must login to ask a question.


Forgot Password?

Need An Account, Sign Up Here

Please briefly explain why you feel this question should be reported.

Please briefly explain why you feel this answer should be reported.

Please briefly explain why you feel this user should be reported.

Sign InSign Up

AccountingQA

AccountingQA Logo AccountingQA Logo

AccountingQA Navigation

  • Home
  • Ask Questions
  • Write Answers
  • Explore
  • FAQs
Search
Ask A Question

Mobile menu

Close
Ask a Question
  • Home
  • Questions
    • Most Visited
    • Most Active
    • Trending
    • Recent
  • Follow
    • Categories
    • Users
    • Tags
  • Write an Answer
  • Badges & Points
  • Request New Category
  • Send a Suggestion
  • Search Your Accounting Question..

Radha
Radha
In: 1. Financial Accounting > Journal Entries

What is the journal entry for loan taken from a person?

What is the journal entry for loan taken from a person?
  • 1 1 Answer
  • 0 Followers
  • 0
Share
  • Facebook

    Related Questions

    • What is the difference between ledger and subledger?
    • Can someone give examples of net profit and gross profit?
    • Is net profit an asset or liability?
    • What is Gross profit versus net profit?
    • What is bills payable and bills receivable book ?
    • Is it necessary for non- profit organisation (NPO) to do accounting ?
    • Why is profit and loss suspense an asset ?

    You must login to add an answer.


    Forgot Password?

    Need An Account, Sign Up Here

    1 Answer

    • Voted
    • Recent
    1. Rahul_Jose Aspiring CA currently doing Bcom
      2021-12-04T12:00:06+00:00Added an answer on December 4, 2021 at 12:00 pm
      This answer was edited.

      When a loan is taken from a person by a business, there is an asset and liability being created. Cash is being brought into the business which increases the asset whereas the financial obligation of the company rises when a loan is taken and hence a liability increases.

      For example, Mark Ltd. has taken a loan from John for $5,000. Therefore the journal entry can be shown as:

      According to the modern rules of accounting, increase in assets is Debit and increase in liability is credit. The company may have taken the loan to finance its business or for some emergency. When it is time for the business to pay off the loan, they can either pay it off completely or in instalments. They must pay off the principal amount along with interest.

      Now for our above example, if Mark Ltd paid off the entire loan after one year at 10% interest, then the journal entry would be:

      Here, the interest on loan account is debited since an increase in expense is debited. Loan account will be debited because the obligation is now reduced and hence liability decreases. Finally, we credit cash since cash is leaving the business which implies a decrease in assets.

      If the entire loan is not paid off in that year, then the balance of the loan amount will be shown in the balance sheet under the head liabilities.

      • 0
      • Share
        Share
        • Share on Facebook
        • Share on Twitter
        • Share on LinkedIn
        • Share on WhatsApp

    Sidebar

    Question Categories

    • 1. Financial Accounting

        • Accounting Terms & Basics
        • Bank Reconciliation Statement
        • Banks & NBFCs
        • Bills of Exchange
        • Capital & Revenue Expenses
        • Consignment & Hire Purchase
        • Consolidation
        • Contingent Liabilities & Assets
        • Departments & Branches
        • Depreciation & Amortization
        • Financial Statements
        • Goodwill
        • Insurance Accounting
        • Inventory or Stock
        • Investment Accounting
        • Journal Entries
        • Ledger & Trial Balance
        • Liquidation & Amalgamation
        • Miscellaneous
        • Not for Profit Organizations
        • Partnerships
        • Ratios
        • Shares & Debentures
        • Source Documents & Vouchers
        • Subsidiary Books
    • 2. Accounting Standards

        • AS
        • IFRS
        • IndAS
    • 3. Cost & Mgmt Accounting
    • 4. Taxes & Duties

        • GST
        • Income Tax
    • 5. Audit

        • Bank Audit
        • Internal Audit
        • Miscellaneous - Audit
        • Statutory Audit
    • 6. Software & ERPs

        • Tally
    • 7. MS-Excel
    • 8. Interview & Career
    • Top Questions
    • I need 20 journal entries with ledger and trial balance?

    • Can you show 15 transactions with their journal entries, ledger, ...

    • Following is the Receipts and Payments Account of Bharti Club ...

    • Prepare Income and Expenditure Account of Youth Club from the ...

    • What is loose tools account and treatment in final accounts?

    • What is furniture purchased for office use journal entry?

    • What is mobile phone depreciation rate?

    • How to show adjustment of loose tools revalued in final ...

    • How much is depreciation on camera?

    • What is the treatment of preliminary expenses in cash flow ...

    Hot Topics

    Accounting Policies Accounting Principles Balance Sheet Bank Reconciliation Statement Bill of Exchange Branch Accounting Calls in Advance Capital Capital Expenditure Companies Act Compound Entry Consignment Creditors Current Assets Debit Balance Debtors Depreciation Difference Between Dissolution of Firm Dissolution of Partnership Drawings External Users Fictitious Assets Final Accounts Financial Statements Fixed Assets Fixed Capital Fluctuating Capital Gain Impairment Installation Interest Received in Advance Internal Users Journal Entry Ledger Loose Tools Miscellaneous Expenditure Profit Rent Rent Received in Advance Reserves Revaluation Revenue Expenditure Revenue Reserve Sacrificing Ratio Subscription Subscription Received in Advance Trial Balance Type of Account Uncalled Capital
    • Home
    • Questions
      • Most Visited
      • Most Active
      • Trending
      • Recent
    • Follow
      • Categories
      • Users
      • Tags
    • Write an Answer
    • Badges & Points
    • Request New Category
    • Send a Suggestion

    Most Helping Users

    Astha

    Astha

    • 50,251 Points
    Leader
    Simerpreet

    Simerpreet

    • 27 Points
    Curious
    AbhishekBatabyal

    AbhishekBatabyal

    • 25 Points
    Curious

    Footer

    • About Us
    • Contact Us
    • Pricing
    • Refund
    • Forum Rules & FAQs
    • Terms and Conditions
    • Privacy Policy
    • Career

    © 2021 All Rights Reserved
    Accounting Capital.