Loan Repayments

How do I record loan repayments?

To record a loan repayment, you must first:

1. Set up all accounts associated with the purchase of an asset via a loan.
2. Enter the purchase of the asset via a loan into Cashbook.

You can then optionally add the asset to the Fixed Asset Register.

Click on the following link for step-by-step instructions on how to setup all accounts associated with the purchase of an asset via a loan.

A loan repayment has two parts:-

• the principal - the amount of money borrowed to purchase the asset, and
• the interest - the amount charged by the lender to a borrower for the use of the asset/s, expressed as a percentage of the principal.

Loan repayments are ususally either: -

• Repaying principal and interest - arrangement to repay the loan in full over time.
• Paying interest only - not prinicpal. This means the principal (the amount borrowed) will not be reduced at all.  (Interest on an investment loan is tax deductible.)

An example to illustrate: Your company borrows $131,230 from a financial institution to purchase a tractor. Your monthly repayment per month is $2,384.07. This is made up of a loan (principal) repayment of $2302.36 and an interest payment $81.71.

Step 1.

1. Click on the Cashbook toolbar icon.
2. Click on the Add button.
3. Click Yes to the Confirm message: 'Do you want to enter transaction for "name of your bank account", in the company file "name of your company"?

Step 2.

In the Add Transaction window, enter the following details:

1. Type - click on Payment indicator button..
2. Date - when payment is made. (DD/MM/YYYY format or select from pop-up calendar) e.g. 01/08/2017
3. Reference - select/+ from drop-down menu. e.g. D/DEBIT (Direct Debit - when payment is automatically taken out of your bank account on agreed dates.)
4. Paid To - name of bank/finance company e.g. Tractor Finance Company.
5. Gross Amount Including GST - repayment amount. e.g. $2384.07
6. Dissection Details:

• For this example, the payment is made up of 2 dissections:
  • Loan Repayment - e.g. JD Tractor Loan Repayments $2302.36 (Principal) (The principal repayment will reduce the amount of the loan.)
  • Interest - e.g. Loan Interest Paid (The interest payment, if paid in full, will not affect the amount of the loan.)

• Note: If you do not know how much of your repayment is principal and how much is interest, enter the total amount of the loan repayment to the Loan Repayment account and enter a comment in the Note (Optional) section of the Add Transactions window, indicating that the payment is both Principal and Interest. This is so your accountant knows to make an allocation adjustment for you at the end of the financial period.
• Similarily, you can ask your finance provider for an amortization or interest schedule. Not all finance companies will provide these, so you can ask your accountant to prepare one for you. To do this, your accountant will need to see the loan documentation.

• Click on the OK button to record the payment.