Accounting question regarding how to post when paying off a bank loan?


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Paying off a bank loan is a ____________ activity?

operating
financing
investing
operating if it was a short-term loan; financing if it was a long-term loan


Banks in Brandon, FL



Answer (2):

 
Karl Sexton, Accounting On Call

Financing

Good Luck!

Karl Sexton
Accounting On-Call
Brandon - Riverview Fl
(813) 641-4262
www.AccountingOnCall.com

 
smahadevan39

Please note that a Bank Loan account will show a Credit Balance in your book. Hence
When you make the payment,

Credit Cash ( if you make cash payment) OR
Credit Bank ( if you pay through cheque) and Debit the Bank Loan account.

If you are completely closing the Bank Loan account:

Debit Interest account (with the interest charged by the Bank) and Credit Bank Loan a/c
Debit cash or Bank and Credit Bank Loan account ( for the full amount)

Paying off a Bank Loan account is an operating activity.

 

Relevant answer in Brandon, FL