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: