How to prepare accounting entries for company loans
During the operation and development of the company, when the capital chain has problems, borrowing business will generally occur. How to make accounting entries for company loans?
Company loan entry
Take short-term borrowings as an example:
When obtaining short-term loans:
Debit: bank deposit
Credit: short-term loan
Accrued interest at the end of the period:
Debit: financial expenses
Credit: interest payable
Repayment of short-term loan interest:
Debit: interest payable (return accrued interest)
Credit: bank deposit
Short term loans refer to various loans borrowed by enterprises from banks or other financial institutions with a repayment period of less than one year according to the needs of production and operation, including production revolving loans, temporary loans, etc.
Details of borrowing costs
Borrowing costs include interest on borrowings, amortization of discounts or premiums, ancillary costs and exchange differences arising from foreign currency borrowings.
The equity financing costs incurred by the enterprise shall not be included in the borrowing costs. The financing costs incurred in the financial lease recognized by the lessee according to the lease accounting standards belong to the borrowing costs.
The interest incurred by borrowing includes the interest incurred by the enterprise in borrowing funds from banks or other financial institutions, the interest incurred in issuing corporate bonds or corporate bonds, and the interest borne by the interest bearing debt incurred for the acquisition and construction or production of assets eligible for capitalization.
The discount or premium arising from borrowing mainly refers to the discount or premium arising from the issuance of bonds. The essence of the discount or premium in the issuance of bonds is the adjustment of the bond coupon interest (that is, the bond coupon interest rate is adjusted to the actual interest rate), which belongs to the category of borrowing costs. For example, XYZ Company issues corporate bonds with a face value of 100 yuan, an annual coupon rate of 6% and a term of 4 years, while the market interest rate in the same period is 8%. Since the coupon rate of corporate bonds is lower than the market interest rate, it is a successful issue of corporate bonds, XYZ Company has adopted the method of discount issuance. The amount of discount is actually used to compensate investors for the loss of nominal interest after purchasing bonds, and should be used as the adjustment amount of interest expenses in subsequent periods.
Auxiliary expenses incurred due to borrowing refer to the expenses incurred by an enterprise in the process of borrowing, such as handling fees and commissions. These expenses are incurred due to the arrangement of borrowing, also belong to the cost of borrowing funds, and are part of borrowing costs.
The exchange difference arising from foreign currency borrowings refers to the amount of influence on the amount of bookkeeping functional currency of the principal and interest of foreign currency borrowings caused by the difference between the market exchange rate and the book exchange rate due to the change of exchange rate.
The equity financing costs incurred by the enterprise shall not be included in the borrowing costs.