POA @ Hillgrove - Chapter 13 Long-term Borrowings

Chapter 13 Long-term Borrowings

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When loan is taken up:

Dr Cash at bank (+A)

Cr Loan: <name of bank> (+L)

When loan is repaid:

Dr Loan: <name of bank> (-A)

Cr Cash at bank (-L)

Remember to always bal b/d to the 1st day of the next accounting year.

Interest paid = Interest rate x Loan

Note:

Interest incurred = (x/12 x Interest rate x Loan amt $a)

+ (y/12 x Interest rate x Loan amt $b)

Note:

Interest incurred is the amount of interest that corresponds to the loan amount used during the accounting year
x + y = 12 months
Loan Amt $a refers to loan amount before partial loan repayment
Loan amt $b refers to loan amount after partial loan repayment

Interest payable = z/12 x Interest rate x Loan

Note:

Interest payable is the amount of interest that corresponds to the loan amount used during the accounting year but for which interest has not yet been paid.
z refers to the no of months where loan was in use but for which interest has not yet been paid.

Note:

Interest paid on 31 July 2019 should have been:

4% x $38400 = $1536

Interest incurred for the year ended 31 December 2019 should have been:

(7/12 x 4% x $38400) + (5/12 x 4% x $28800) = $1376