How to record a business loan
A loan is money borrowed, not money earned. Post a bank loan and a loan from a relative, and keep the owner's money apart.
Task 1Money borrowed is owed3 questions
A business loan is money borrowed that must be paid back. Until it is, it is a liability.
The money arriving is not income, because the business has not earned it.
- Loan received
- debit Bank, credit the loan account
After Jo's £8,000 came in and the coffee machine was paid for, Kestrel Coffee has £5,000 in the bank. The bank then lends it £6,000.
Task 2The owner's money or a loan3 questions
You sort items into the right place, work out a figure and match pairs.