Book Keeping - Balance sheet query

[paulm72]

Hi all

I've just joined the forum and I'm a sole trader. I have completed a small business accounts course and a computerised accounts course and use Microsoft Excel to keep my books.

I have my books for 2007 nearly complete except the balance sheet. I need to know how to record my business loan on the balance sheet. I am aware that it must be recorded under long term debts but is it the outstanding loan amount at year end that goes in here or a different amount?

Also is there a need to insert the business loan under Financed By: as part of the original investment?

Any help would be greatly appreciated as I'm 95% finished with my books.

 

[johnnybegood]

Hi based on the information provided the loan should be treated as follows:

debit:
Bank x with the amount of loan received

Credit:
Current Liabilities x
Long term liabilities x

The current liabilities figure will be made up of the amount that is due to be paid back within one year. That is 12 months payments less the interest incurred during the year.

The long term liabiltiies will be the remaining loan figure less the amount included in current liabilities.

Obviously you will also have to account for any payments made during the year or any interest incurred. I have assumed you know how to post these as you have not queried them in your post.

The loan should not be shown under the Financed by section as it does not represented shareholders funds introduced.

Johnnybegood