IF SOME ONE TAKE LOAN AND STARTED HIS BUSINESS THE journal entrY WILL BE
To record the situation where someone takes a loan and uses it to start a business, you would need to make a journal entry that reflects both the loan liability and the increase in assets from the loan proceeds. Here's how you can make the journal entry:
1. Determine the amount of the loan taken. Let's say it's $10,000.
2. Identify the accounts involved. In this case, you'll have a liability account (e.g., "Loans Payable") to record the loan and an asset account (e.g., "Cash" or "Bank") to record the loan proceeds.
3. Debit the appropriate asset account. In this case, debit the "Cash" or "Bank" account for $10,000. This represents the increase in assets from the loan funds received.
4. Credit the liability account. Credit the "Loans Payable" account for $10,000. This records the increase in liability due to the loan taken.
The journal entry would therefore look like this:
Date | Accounts | Debit ($) | Credit ($)
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[Today] | Cash (or Bank) | 10,000 |
Loans Payable | | 10,000
The entry reflects the increase in Cash/Bank (asset) and the creation of a Loans Payable (liability) account to track the outstanding loan amount.