SageForum for UK versions of Sage 50- Help and support.

Hi,

My company recently got a term loan which we entered into our Sage 50 Accounts Plus 2013 as nominal code 2300. We did not set it up as a bank account. We received a statement in the post and interest has been applied onto the loan. How do we record the interest in Sage as this interest has not come out of any of our bank accounts and has just been added onto the actual loan? We are making monthly payments for the term loan so we are doing it as a bank receipt for nominal code 2300 but now with the interest added onto the loan it has confused us as we don't know how to enter it on Sage.

I would greatly appreciate any help!

Thanks in advance!

So you borrow money, is appears on the balance sheet as a debt in 23xx you make repayments against that account, but those repayments are actually, not paying off just the loan, they are paying both the loan and the interest, at this point the interest is not appearing anywhere, there is no cost in the P&L for that loan. In the balance sheet it shows you have paid off more of the loan that you actually have because again no interest has been taken into account.

So what we need to do is we need to increase the loan amount in 23xx by the interest element and we need to show the cost of the loan (the interest element) somewhere in the P&L (79xx)

To do both these things you need to do a journal.
Increase the size of the loan by crediting the loan account (23xx) by the interest amount and add in the expenditure on interest into the interest (79xx) account by debiting it, this balances out the journal.

After doing this, the Balance sheet shows what is really outstanding on the loan and the P&L shows what the cost of the loan has been.


If the amount is pretty small then you might do a single journal for the whole year, if it is more significant then you might do it monthly.

If it is a variable rate, you might end up doing a monthly accrual/prepayment and then every time you get a statement making an adjustment to get it exact.

As with so many things in accounting, we need to be "representative", if we are only interested in having things spot on for year end, then we can take a different approach to if we are doing monthly management accounts, even then if the amount is a significant sum then we might treat it differently to if it is a pretty minor amount.

I hope this helps.

Many thanks for the reply Bruce!

This solved my problem! I really appreciate the help!

Thanks again!