Not asked questions in a while, but need to ask about posting figures related to a Business Bank Loan?
The bank in question - Barclays has set up a new loan for us and sent through details as a new "loan account", so was just questioning myself on whether we should set up a new bank account called Barclayloan, or use an existing nominal on chart of accounts called bank loan under current liabilities?
Guess the nominal under liabilities must have been used on very initial start-up loan some five years back and worked OK, but was just questioning what "best practice" would be?
I say accounts as the Libility is broken down between Current and long term liabilities with a chunk equivalent to the capital element of the payments taken each year from Long term to current until the loan is repaid.
Repayments to the loan are of course divided between the loan liability and the interest (which is expensed).
HTH,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
As the loan is actually only for 12 months and is going to be repaid after only two months (as is to cover a very short cashflow issue) would it be best all in current liabilities?
Ah, that's more like an overdraft than a loan (Would an overdraft not be better as you only pay interest on an overdraft whilst using it whereas with a bank loan the interest over so short a period would in many cases be payable in full even if repaid early).
Anyway, Yep, Dr Bank, Cr current liabilities then just divide out the capital and interest repayments.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
In fact that is only bit of good advice from our "Business Bank Manager", as overdraft has to be a year long contract and the fees alone are more than the interest we will end up paying!
Works out a lot cheaper with Barclayloan if we pay back within six months, let alone only two.
Thanks for help, will use Current Liabilities code as earlier loan.
