How to split a loan repayment into capital and interest
Part of each repayment lowers the loan and part is interest, an expense. Split a payment, post it, and follow the balance down.
Task 1Two parts to every repayment3 questions
Each repayment has two parts. The capital part pays back what was borrowed, so it lowers the loan. The interest part is the cost of borrowing, so it is an expense.
The lender's statement shows how each payment is split.
- Capital part
- debit Bank loan
- Interest part
- debit Loan interest
- The whole payment
- credit Bank
At the end of the first year Kestrel Coffee pays the bank £1,980. The bank's statement says £480 of it is interest.
Task 2The balance owed3 questions
You work out a figure and find the mistake in a table.