Loan/Note Payable General Journal Entry. The principal repayment is 176.46 which is the cash payment of 187.05 less the interest expense of 10.59. Debit Loan … Nowadays, financial institutions (bank, finance company, co-operative etc) provide loan by opening bank account. On October 1, 2005, XYZ Co. lent $48,000 to TightFit Shoes. Banks and lenders charge interest on their loan repayment on a periodical basis. For the PPP loan, interest begins to accrue from the date your business receives funds. The period can be monthly or semi-annually with interest paid out based on a payment schedule. Therefore, the next interest payment will be smaller than the previous interest payment. The initial journal entry to record the issuance of the bonds, and the final journal entry to record repayment at maturity would be identical to those demonstrated for the straight-line method. Note: The Notes Payable account could have been substituted for Loan Payable The debit to the interest expense records the accounting entry for interest on the loan for the year calculated at 6% on the beginning balance. Loan Repayment Journal Entry Explained. To record accrued interest on note at year end: Mar 1: Notes Payable (principal amount) 10,000: Interest Payable (from Dec 31 entry) 75 Interest Expense: 150: $10,000 x 9% x (60 days remaining in note / 360 days in year) Cash (10,000 + 75 + 150) 10,225: To record principal and interest paid on bank loan. Let's assume that a company has a loan payment of $2,000 consisting of an interest payment of $500 and a principal payment of $1,500. The company's entry to record the loan payment will be: Debit of $500 to Interest Expense Debit In each of these journals there are two debit entries. The size of the entry equals the accrued interest from the date of the loan until December 31st. If you receive a PPP loan, loan payments are deferred for six months with interest accruing during the six-month period. Treatment of Interest Received from Bank in Final Accounts Interest from banks is an indirect income and shown in income side or profit and loss account . Chapter 13: Long-Term Notes . Interest on loan is payable with installment. In your bookkeeping, interest accumulates on the same periodic basis even if the interest is not due. Journal Entry for Interest Received [ 4 Answers ] I'm having problems with the Journal Entry for the following: Thanks in advance for any assistance! As a reminder, the interest rate is 1%. Accrued interest is first added to interest received from bank and then it is shown in assets side of balance sheet . A note was signed with principle and 10% interest to be paid on September 30, 2006. Record the Loan Interest. For your scenario the journal would have three lines. And installment is sum of principal amount and interest. 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