Loan taken from bank journal entry

Loan taken from bank journal entry

When an individual or a firm or a company needs money to expand its business, it borrows from the bank and for this, a journal entry is made in the books of account as follows:
Example: On January 1, 2022, Mr. X’s loan taken from the bank ₹5,00,000.pass journal entry in the books of account.

Explanation: According to the Traditional Approach

In this transaction, two accounts are affected first Bank account and the Bank loan account.

1. Bank Account (Personal  Account)

Rules of personal Account: Debit the receiver credit the giver.
Bank account will be debited as per rules(Debit the receiver)  at the time of passing the journal entry.

2. Bank loan  Account (Personal  Account)

Rules of personal Account: Debit the receiver credit the giver.
Bank loan account will be credited as per rules (credit the giver)  at the time of passing the journal entry.

Loan taken from bank journal entry:

Loan taken from bank journal entry
Loan taken from bank journal entry

 

Example: On January 1, 2022, Mr. Y’s loan taken from the bank ₹8,00,000. pass journal entry in the books of account.

Explanation: According to the Modern Approach

In this transaction, two accounts are affected first Bank account and the Bank loan account.

1. Bank Account (Assets  Account)

Rules of Assets Account: Increases in assets are debits; decreases in assets are credits.)
Assets increase in form of the bank so, the Bank account(Assets Account) will be debited as per rules (Increases in assets are debits)  at the time of passing the journal entry.

2. Bank loan  Account (Liability Account)

Rules of Liability Account: Increases in liabilities are credits; decreases in liabilities are debit.)

Liabilities increase in form of the bank loan so, Bank loan account(Liability Account) will be credited as per rules (Increases in liabilities are credits)  at the time of passing the journal entry.

Loan taken from bank journal entry:

Loan taken from bank journal entry
Loan taken from bank journal entry

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