Question

how would i journalize a company that has paid all of its amounts owed?

Answer 1

Hey there! As you have given very little information, I would try to provide as much help as possible.

A company may have many different types of borrowings or liabilities. Some of them can be:-

1. Long term loans

2. Accounts payable

3. Working Capital loan

4. Unsecured Loans

5. Interest accrued on borrowings

The process of repaying the liabilities can be journalized. Once all the liabilities have been repaid, the company stands with no debt and only assets and equity. Equity is also shown on the liability side but it is repaid only on winding up of the company.

Journal entries on repayment of different liabilities with hypothetical amounts can be:-

S. No.	Particulars	Debit	Credit
1.	Lender Bank Account	10000
	To Bank		10000
	(being long term loan principal repaid)
2.	Accounts Payable	2000
	To Cahs/ Bank		2000
	(Being accounts payable settled)
3.	Lender Bank/ Unsecured Loan Lender	5000
	To Bank		5000
	(Being working capital loan/ Unsecured Loan repaid)
4.	Interest accrued on borrowings	1000
	To Bank		1000
	(being accrued interest paid)

Now, if you meant to repay the equity capital of the company, which is only done on winding up of the company, the journal entries can be:-

S. No.	Particulars	Debit	Credit
1.	Equity Capital A/c	10000
	Securities premium a/c	5000
	To Equity Shareholders account		15000
	(Being amount due to the shareholders on winding up)
2.	Equity Shareholders account	15000
	To bank		15000
	(being amount due to the shareholders paid through bank)

Hope it helps.