How to record Secured Term Loan?
“ Term Loan” refers to the terms and conditions involved when borrowing money. This can include the loan's repayment period, the interest rate and fees associated with the loan, penalty fees borrowers might be charged, and any other special conditions that may apply.
Under ProfitBooks to record term loan, follow the given steps:
Create a new account by clicking Accounting > Chart of account, click on Add New Account.
Fill in the details like:
Account name: loan
Account group: select secured loan account
Effective date: date of loan taken
Opening balance: Enter a negative amount for the credit balance
Fill in other details of loan like loan account number, interest rate, bank name, address of the bank, etc. as per the image shown below.
Click on save account.
Pass journal entry for borrowing the money
Go to Accounting > Journal entry, click on Add New Record
Select the date of accounting and debit the bank account with the loan amount and credit the loan account with the same amount. User can add descriptions to the description box.
For reference please check the below image of a journal entry