How Would I Record a Loan to Be Paid at a Later Date?
When your company obtains a loan that it will pay back at a later date, you can record the amount of the loan in your accounting journal to show the amount you received and the same amount you owe. The amount of money you receive from a loan adds to your cash balance, which is an asset account. The amount of money you owe adds to your loans payable account, which is a liability. Assets are your company's resources for its operations, and liabilities are amounts you owe to others, such as creditors.
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Instructions
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Determine the amount of money you received from a loan and the date on which you received it. For example, record the receipt of $10,000 from a loan on January 30.
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Write the date you received the loan in the date column of your accounting journal to show a new journal entry. For example, write "01-30" in the date column.
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Write "Cash" in the accounts column and the amount of the loan in the debit column on the first line of the journal entry to show an increase in your cash account. Debit can mean either increase or decrease depending on the type of account. Debit amounts increase the cash account. For example, write "Cash" in the accounts column and "$10,000" in the debit column.
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Write "Loan Payable" with a left indent in the accounts column and the amount of the loan in the credit column both on the next line to reflect the liability for the amount of the loan. Credit can mean either increase or decrease depending on the account. A credit increases a liability account. For example, write "Loan Payable" in the accounts column and "$10,000" in the credit column.
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Write a description of the journal entry in the accounts column on the next line. For example, write "Borrowed $10,000 for five years at five percent interest per year."
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Tips & Warnings
You may substitute "Note Payable" for "Loan Payable" in your journal entry.
References
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