Enterprises need to pay interest after lending to banks, which is generally included in financial expenses accounting. How to make accounting entries after receiving loan interest is a common problem in accounting work. If there is a loan transaction between enterprises, it will generate certain interest, which can be used to offset financial expenses.
Accounting entries for confirming loan interest
1. When withdrawing money: debit: financial expenses; Loan: Interest payable.
2. When actually paid: Borrow: interest payable loan: bank deposit.
There are three conditions for capitalization of borrowing costs:
1. Asset expenditure has occurred. This condition refers to the expenses incurred by the enterprise for purchasing and constructing assets that meet the capitalization conditions, including the expenses incurred in the form of paying cash, transferring non-cash assets and undertaking interest-bearing debts.
2. The borrowing cost has been incurred. This condition refers to the borrowing costs incurred by the enterprise for purchasing, constructing or producing assets that meet the capitalization conditions, or the borrowing costs incurred for the occupied general loans.
3. The construction or production activities necessary to make the assets reach the predetermined usable or saleable state have started.
Accounting of financial expenses
Financial expenses belong to the expense account in the profit and loss account, and financial expenses refer to the expenses incurred by enterprises to raise funds needed for production and operation. Specific items include interest expenses (minus interest income), exchange gains and losses, handling fees of financial institutions, cash discounts incurred or received by enterprises, etc.
Accounting of interest payable
Interest payable is a liability. Refers to the interest paid by financial enterprises to units and individuals on schedule according to the amount of deposits or bonds, their term and the prescribed interest rate. This course accounts for the interest payable by the enterprise in accordance with the contract, including the interest payable on deposits, long-term loans to repay the principal in installments, corporate bonds, etc.
This course should be detailed accounting by depositors or creditors. The credit balance at the end of this course reflects the interest that the enterprise should pay but has not paid according to the contract.