hello.... i want to know wat will be the journal entry passed for starting business by taking loan....it shud be cash debit, loan credit..... dat means there will be no capital.... pls answer my query
9 Replies
CA. Deepak Narula
(B.Com., ACA, DISA)
(541 Points)
Replied 17 August 2012
The entry is right. But generally banks don't finance 100% for strating a project. But hypothetically if we assume that bank financed 100% then your journal entry is correct:
Cash/Bank A/c Dr.
To Bank Loan A/c
Now when the business will earn profit after allowing all expenses including interest on loan that will form form part of capital and entry will be:
Profit & Loss A/c Dr.
To Capital A/c
(Being profit transferred to capital)
Uma
(Student)
(158 Points)
Replied 19 August 2012
Starting the business with cash:
Cash a/c Dr.
To Owner's capital a/c
Starting the business with loan:
Cash a/c Dr.
To Bank a/c
here, why we are using?
Bank A/c Dr.
To Bank Loan A/c
garg.acu@gmail.com
(garg.acu@gmail.com)
(47 Points)
Replied 19 August 2012
I agree Mr. Deepak
but not agree with umavalli
Uma
(Student)
(158 Points)
Replied 20 August 2012
Here, I am asking
why we are using
Bank A/c Dr.
To Bank Loan A/c Dr.
anyone explain?
DAYANANDA K N
(ACCOUNTS EXCECUTIVE)
(575 Points)
Replied 21 August 2012
Amount will be credited to your bank account and hence you need to debit bank. As amount you have received as loan it should be shown as liability and hence credited to bank loan a/c
Regards
Dayananda
Suraj Musaddi
(CA Final Student)
(25 Points)
Replied 30 September 2017
Bank A/c Dr. To Loan A/c Cr. Reason: here the business is not getting owners equity.
Ashish Kalsi
(CMA (Final))
(26 Points)
Replied 26 April 2018
Just one question more, in future years while making repayment of loan taken to start up a business, the loan would be repaid as normally paid as :-
Interest A/c Dr.
Loan A/c Dr.
To Bank A/c
(Being loan installment paid)
????
So that means when we taken loan from bank to start up a business we pass :-
1. Bank A/c Dr.
To Loan A/c
(Being loan taken from bank to start up a business)
2. All Expenses A/c Dr.
To All incomes A/c
To Profit & Loss A/c
(Being Profit made during the year)
3. Profit & Loss A/c Dr.
To Capital A/c
(Being Profit during the year has been transferred to Capital A/c)
and the last one is:-
4. Interest A/c Dr. annual interest
Loan A/c Dr. loan repayment
To Bank A/c installments
(Being loan installment paid)
Is that all or any more entry also we have to pass????
satish
(teaching)
(2046 Points)
Replied 26 April 2018
YES. SUFFICIENT. NOTHING IS REQUIRED ADDITIONAL ENTRIES
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