Accounting entries for payment of loan interest
If the capitalization condition is not met, when drawing:
Debit: financial expenses
Loan: interest payable
When paying:
Borrow: interest payable
Loans: bank deposits
If the capitalization conditions are met:
When withdrawing money:
Borrow: subjects such as projects under construction.
Loan: interest payable
When paying:
Borrow: interest payable
Loans: bank deposits
What are financial expenses?
Financial expenses refer to the expenses incurred by enterprises to raise funds needed for production and operation.
It should be noted that the interest expenses incurred by the enterprise during the preparation period should be included in the organization expenses; Borrowing expenses that should be capitalized for the purchase, construction or production of assets eligible for capitalization shall be accounted for in such subjects as "construction in progress" and "manufacturing expenses".
"Financial expenses" is a profit and loss account. At the end of the period, the balance of undergraduate projects should be transferred to the subject of "profit this year".
In the income statement, the single item "financial expenses" reflects the financial expenses incurred by the enterprise, and is filled in according to the amount of the "financial expenses" subject, that is, the balance carried forward at the end of the period.
How to understand the interest payable?
Interest payable refers to the interest payable by the enterprise according to the contract, including the interest payable on deposits, long-term loans with interest paid by installments and corporate bonds.
The "interest payable" account belongs to the liability account, and the debit indicates a decrease, that is, the interest has been paid; The lender indicates an increase, that is, the unpaid interest payable increases. The credit balance at the end of the period reflects the unpaid interest payable by the enterprise. And this account can be accounted for in detail according to the detailed accounts set by depositors or creditors.