How do I deal with company loans?
Contents
Summary
This article will explain how to deal with Company Loans and how to add them to the system so that you can show the loan amount, each individual fee or charge that may incur by having a loan as well as interest on the loan. This article will also explain how to make a payment against the loan, to the point that the loan has been paid.
More Information
Creating the Nominal Codes
To start, you will need to create the nominal codes for both the Bank Loan and for the bank charges and interest that will be charged. Please see How do I Create a Nominal Code? to create nominal codes and then set up the codes as follows:
Bank Loan Nominal
Following the instruction of how to create a nominal code you will need to set-up the "Bank Loan" as follows:
- Create a Nominal code with a number 198?? (To Coincide with Standard nominal code structure), giving it the "name" of 'Bank Loan'.
- The bank loan Nominal Code will need to be a set-up as a "Balance Sheet Indicator" 'Asset/Liability' type.
Bank Interest/Charges Nominal
Following the instruction of how to create a nominal code you will need to set-up the "Bank Interest/Charges" as follows:
- Create a Nominal code with a number 153?? (To Coincide with Standard nominal code structure), giving it the "name" of 'Loan Interest/Charges'.
- The bank interest/charges Nominal Code will need to be a set-up as a "Profit & Loss Indicator" 'Overhead' type.
Journalling the Bank Loan
The first step is to journal into the system the full amount of the loan. To do this, you will need to go to : " Nominal Ledger Journal Entries".
Bank Lending Fee
The first item that will need to be journalled is the initial Bank Charge for taking out the loan. To journal this :
- At the "Entry mode:" choose 'Multiple'
- At the "Date:", enter the date at which the Bank lending fee was charged.
- At the "Reversing?" choose 'No'
- Enter the centre for the Bank Loan Account and enter the amount as a Credit.
- Enter a comment of 'Lending fee'.
- Enter the centre for the Loan Interest/Charges and enter the figure as a Debit
- The 'Nett' value should show 'Zero'
Bank Loan
The second item that will need to be journal is the amount of the loan. To journal this you will need to:
- At the "Entry mode:" choose 'Multiple'
- At the "Date:", enter the date at which the Bank lending fee was charged.
- At the "Reversing?" choose 'No'
- Enter the centre for the Bank Loan Account and enter the amount as a Credit.
- Enter a comment of 'Bank Loan'.
- Enter the centre for the Current Bank account and enter the figure as a Debit
- The 'Nett' value should show 'Zero'.
- <Done> and the journal will be posted.
Journalling Any Interest/Charges
Each month there will be an interest charge for having the loan. This and any other charges will all get journalled in the same fashion. You will need to do this every time that a charge or interest is added. To journal the interest/charges you will need to:
- On the "1st Centre:", enter in the centre for the Bank Loan Account, e.g. '19860'. Press <Enter>.
- On the "Date:", enter the date of the Interest Charge, or the Charges that have been added to your account. Press <Enter>.
- On the "Amount:" enter the amount that is being charged for interest, e.g. '-131.70'. Press <Enter>.
 | This needs to be entered as a negative figure as it is a crediting the account. |
- On the "Cheque No./Comment:", enter a comment of 'Interest Charged'. Press <Enter>.
- On the "2nd Centre:", enter in the centre for the Loan Interest/Charges, e.g. '15319'. Press <Enter>.
- The system will automatically enter in the opposite amount to that which was entered previously, i.e. '131.70'. Press <Enter>.
- Click on [Accept] on the screen prompt that appears.
Journalling the Payments
Now it is time to journal the payment into the system. To journal this you will need to:
- On the "1st Centre:", enter in the centre for the Current Bank Account Account, e.g. 'Z992'. Press <Enter>.
- On the "Date:", enter the date of which the Bank payment has been paid. Press <Enter>.
- On the "Amount:" enter the amount of the payment, e.g. '-490.68'. Press <Enter>.
| This needs to be entered as a negative figure as it is a crediting the account. |
- On the "Cheque No./Comment:", enter a comment of 'Loan Payment'. Press <Enter>.
- On the "2nd Centre:" enter in the centre for the Bank Loan, e.g. '19860'. Press <Enter>.
- The system will automatically enter in the opposite amount to that which was entered previously, e.g. '490.68'. Press <Enter>.
- Click on [Accept].
You will need to continue in this fashion journalling all charges in the method described above, as well as journalling all payments made. To view the amount outstanding you will need to view the centre of "Bank Loan". Eventually this centre will balance back to zero at the point the loan has been fully paid for.
See also
