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