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Loan payments

Hi, just wondering if anyone can help,

I have followed the steps in setting up a loan ‘bank account’ as in the instructions on this site. And all is well until i allocate the interest as ‘loan interest paid’. Now i have a negative balance on the account.
The repayments from main current account brought down the total to zero, but obviously i paid back more than i borrowed. Should I just add the difference in the opening balance???
Does this make any sense. Ps. By no means am i an accountant…ha ha

Interest element should go to P&L , if you have recorded payments including interest then to balance you would need journal
Dr loan interest
Cr loan a/c

Thanks for advice,

I tried that and now its even worse. Basically i had -£400 on the loan bank account now its -£800. I assume i should do the reverse.

Normally with a loan what you’d do is create a bank account that represents the loan with an initial balance of zero, then tag the money in on your current account where you received the loan as a bank transfer from the loan account, leaving the loan account overdrawn by exactly the amount you borrowed. Now when you are charged interest on the loan you’d record that as more money out of the loan account, making it further overdrawn (i.e. increasing the amount you owe), and when you make repayments those are transfers to the loan account reducing the overdrawn balance. When the balance reaches zero the loan is paid off, a loan account should never have a positive balance unless you’ve recorded the repayments before the interest.

Arr i see, thats how i would have done it. But I followed the instructions on the how to guide and it told.me to enter opening balance as a negative number. I like your way!! Thanks for help.
You couldn’t have a quick look at my other query regarding credit card. You seem to know whats what. Im not sure what to tag income from lender on credit card account as.
Thanks again for help.

If you enter an opening balance on the loan account then the contra entry for the balance will go on the suspense account. So then you’d tag the money in where you receive the capital as “something not on the list” also to the suspense account, which leaves you in the same position as if you’d started the loan account from zero and tagged the capital a bank transfer.

I just had a look at loan account, i cant tag the loan money in current account because its an old loan from previous years and all i have is just a few repayment until loan has cleared. What i have done is just knocked off the the interest charge off the opening balance and now it is at zero. Not sure if thats right but hey ho.