Loan Payable
How to set up accounts and record loan transactions in Bkper — tracking principal, interest, and periodic payments.
A loan payable is a liability account (yellow in Bkper) used to track the amount you owe to a lender, including the interest that accrues over time.
Example: Your business takes out a $100,000 loan from a bank at 7% annual interest.
Before recording, it helps to understand two key components:
- Principal — The original sum borrowed. If you repay a $10,000 loan in 10 installments, $1,000 of each installment corresponds to principal.
- Interest — The cost of borrowing, expressed as a percentage of the principal over a period. At 5% annual interest on $10,000, the yearly interest is $500.
Setting up accounts
You need four accounts to track a loan properly:
- Asset account (Bank or Cash) — Where the loan proceeds become available.
- Liability account (Loan Payable) — Tracks the outstanding loan balance.
- Expense account (Interest Expense) — Tracks the cost of borrowing.
- Asset account (Loan Payment) — Splits each payment into principal and interest portions, making it easier to reconcile with bank and loan statements.
Recording the loan
Record the initial loan amount as a movement from the Loan Payable account to the Bank account:
| Date | Amount | From Account | To Account | Description | |
|---|---|---|---|---|---|
| 01/01/2024 | 100,000.00 | Loan Payable | >> | Bank Account | Loan received |
Recording payments
Each periodic payment involves separating the principal repayment from the interest expense:
Record the total monthly payment from the Bank to the Loan Payment account. Then split the Loan Payment into its two components:
| Date | Amount | From Account | To Account | Description | |
|---|---|---|---|---|---|
| 01/02/2024 | 1,500.00 | Bank Account | >> | Loan Payment | Monthly payment #loan |
| 01/02/2024 | 917.00 | Loan Payment | >> | Loan Payable | Principal repayment #loan |
| 01/02/2024 | 583.00 | Loan Payment | >> | Interest Expense | Interest portion #loan |
