Loan Interests

  1. Please are interests on Loans recorded under liabilities or expense account?

  2. If i am repaying loans which are captured under liabilities already do i have to create a purchase invoice before i pay or i just go ahead to accounts and pay. The latter is what i do but i need the professionals advise.

Thank you.

#1: Interest paid to another is an expense. Interest received from another is income. Interest is never a liability.

#2: No. Enter a payment with two line items: allocate the principal amount to the liability account where the loan is recorded; allocate the interest to an expense account.

@Tut Thank you very much.