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Company loans

Created on  | Last modified on 

Summary

How to record a bank loan, the loan repayments, and interest charged in Sage Accounting.

Description

This explains how to record a bank loan, plus how to record the loan repayments and any interest charged.

Follow these steps:

  • Create new ledger accounts for tracking the loan balance and interest payments
  • Record the receipt of the loan as Other Receipt
  • Record loan repayments as an Other Payment

Resolution

Create new ledger accounts

Before you record the bank loan, create two new ledger accounts to keep track of the loan amount and interest payments. You can use these details as an example:

Name Nominal code Category VAT rate
Bank loan 2301 Current Liabilty No VAT
Interest paid 7301 Overheads No VAT
  1. From Settings, choose Business Settings.
  2. Select Chart of Accounts, then New Ledger Account.

  3. Enter the details and Save.

Record receipt of the loan

When the loan is paid into your bank account, record the receipt of the money using the new Bank Loan ledger account.

There are two options to record this: 

  • Create a new receipt from your bank feed or bank statement import each month
  • Manually enter as an Other Receipt. If you use bank feeds or statement imports, match them to the receipt

Using bank feeds or import your bank statement

Process your imported bank transactions.

  1. Select the new Bank Loan ledger account from the What dropdown list.
  2. Select Create.

Manually create bank transactions

  1. From the Banking tab, select New, then Sale / Receipt and Other Receipt.
  2. Enter the details such as the date, amount received and a relevant reference.
  3. Enter the total amount of the loan and choose the Bank Loan ledger account. Do not record any VAT.

Record the loan repayments

When you record the loan repayments, select the new Bank loan ledger account. This reduces the balance of the loan on your balance sheet. Record the interest payments to a separate Interest paid ledger account. The interest payments appear on your Profit and Loss.

There are two options to record this:

  • Create a new payment from your bank feed or bank statement import each month
  • Set up a recurring bank payment. If you're using bank feeds or importing from a bank statement, simply match the payment each period

In the following example, the loan repayment is £95.83 per month, which is split into £83.33 for the loan repayment and £12.50 interest repayment.

Using bank feeds or importing your bank statement

When you process your imported bank transactions

  1. Select the split icon.

  2. On the first line,

    • Select the new Bank Loan ledger account from the What dropdown list

    • Enter the net amount of the repayment. In our example £83.33

  3. On the second line

    • Select the new Interest paid ledger account from the What dropdown list

    • Enter the interest amount. In our example £12.50

  4. Select Create.

Create recurring bank transactions

Use this when you don't have a bank feed and don't import your bank.

  1. From the Banking tab, choose New, then Purchase / Payment and Other Payment.
  2. Enter the details such as the date, total amount paid and a relevant reference.

  3. On the first line,

    • Select the Bank Loan ledger account

    • Enter the net amount of the repayment. In our example £83.33

  4. On the second line

    • Select the Interest paid ledger account

    • Enter the interest amount. In our example £12.50

  5. Select Save.

Make the repayment recurring

  1. Edit the bank payment you've just entered.
  2. Select Make Recurring, then complete the following:

Repeats every - Enter how often you want the transaction to repeat, then choose to repeat in a number of days, weeks or months. For example, to repeat a payment every ten days, in the first box enter 10, then from the second box choose Days.

Repeat Until - Enter the date of the final payment.