Loan Given is our asset on which we will earn interest income
Entries are as follows
Entry for Loan Given
Loan A/c Dr
To Bank
Entry for Interest Income
Loan A/c Dr
To Interest Income
Entry for Amount Received on Maturity of Loan
Bank A/c Dr
To Loan A/c
Pass Entries
Loan given to Vimal Trading Co Rs 200000
Vimal Trading Co repaid in 4 monthly instalments of 60000 each (50000 principal + 10000 interest)
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At the time loan was given:
Vimal Trading Co. A/c Dr 200000
To Bank A/c 200000
(Being loan given to vimal)
At the end of 1 st month:
Interest on Loan Due to Vimal Trading Co:
Vimal Trading Co. Dr 10000
To Interest Income A/c 10000
Receiving of 1 st Installment
Bank A/c Dr 60000
To Vimal Trading Co. A/c 60000
At the end of 2 nd month:
Interest on Loan Due to Vimal Trading Co:
Vimal Trading Co. Dr 10000
To Interest Income A/c 10000
Receiving of 2 nd Installment
Bank A/c Dr 60000
To Vimal Trading Co. A/c 60000
At the end of 3 rd month:
Interest on Loan Due to Vimal Trading Co:
Vimal Trading Co. Dr 10000
To Interest Income A/c 10000
Receiving of 3 rd Installment
Bank A/c Dr 60000
To Vimal Trading Co. A/c 60000
At the end of 4 th month:
Interest on Loan Due to Vimal Trading Co:
Vimal Trading Co. Dr 10000
To Interest Income A/c 10000
Receiving of 4 th Installment
Bank A/c Dr 60000
To Vimal Trading Co. A/c 60000