Journal Entry for Loan Given

Businesses can also provide loans to any person or entity.

A. Loan is given to a person:

Journal Entry: 

Example: A loan of ₹5,000 has been provided to Dharmesh.

Solution:

B. Interest charged and then received on loan given:

There can be a situation where the interest is charged first and then received. There will be two Journal Entries in this case.

i. Journal Entry: (On charging of interest)

Example: Interest of ₹250 is charged to Dharmesh on a loan provided to him.

Solution:

ii. Journal Entry: (On receiving of interest)

Example: Interest due ₹250 is received on loan provided to Dharmesh.

Solution:

Or

C. Interest received on loan given:

In this case, only a single entry is passed because interest is directly received.

Journal Entry: 

Example: Interest of ₹250 is charged to Dharmesh on a loan provided to him.

Solution: