Under provision of Loan

[eileenang]

Hi,

May i know what is the right way to record for under provision of Loan?

For example, I've previously record $100,000 (principal amount, exclude interesst) Loan, after reducing installment for months, i realized that the Loan amount left in my Balance Sheet is not suffice for me to reduce the last installment.

What should be the right way for me to record the last installment?

Kindly advise.

thank you.

 

[kirby]

The sum of all the loan payments should have equaled the loan principal and the sum of the month accrued interest amounts. So maybe you did not accrue the interest correctly?? Anyway now your last payment exceeds the loan balance. So apply that to the loan balance first until that zeros out, then the rest goes to any accrued interest receivable until that zeros out. Any amount left over just record as interest income.

 

[eileenang]

Thank you kirby for your help!

Previous bookkeeping wasn't done by me. i took over and realized this issue.